(Refiles to add dropped word)
By Krittivas Mukherjee
NEW DELHI, Sept 14 India's government has agreed
on a draft law to provide cheap grains to two thirds of its 1.2
billion people, a plan that could widen fiscal deficit but help
win voter support for the government and its allies.
Voter anger at high food prices has damaged the popularity
of Prime Minister Manmohan Singh's centre-left government in a
country where 40 percent of its population live below the U.N.
poverty line, threatening his Congress party's chances in a key
state election next year and the 2014 national elections.
The bill to subsidise food for 810 million people could give
the Congress party-led coalition a political edge at a time when
it is struggling with corruption scandals.
But it will also hurt the government's finances. The planned
subsidies double the cost of an existing programme that sells
cheap grains and pulses to nearly 180 million poor families in
Asia's third largest economy, the agriculture ministry says.
Last year, the government spent $12 billion, or 1 percent of
GDP, on that programme. Other schemes to shield rural areas from
reforms that have driven growth elsewhere in the economy helped
the government win a second term two years ago.
India says it aims to achieve a goal of cutting its fiscal
deficit to a targeted 4.6 percent in 2011/12. Private economists
say the target is not realistic.
In the 1990s, Singh ushered in many reforms that helped
India achieve rapid growth over the last decade. But with
inflation at almost 10 percent and parliament upset with
government corruption, the prime minister is struggling to push
through further reforms.
In the long run, India may find it hard to produce enough
grains to sell at subsidised rates to a growing population,
since farm yields are falling.
The food security bill, which was released by the food
ministry for public debate, must be approved by parliament to
become law, possibly during a winter session that starts in
The draft law proposes widening subsidies to 75 percent of
the rural population and half the urban population with higher
and cheaper allocations for the poorest.
About 70 percent of India's population lives in rural areas.
The government now needs around 4 million tonnes of grain
every month to sell to the poor at cheaper rates. Detailed plans
in the draft bill are expected to give the government a better
idea on how much grain India will have left over for exports.
Through Sept. 1, India held wheat and rice stocks of 33.6
million tonnes at government warehouses, nearly double the
target of 17.1 million tonnes. The government has built up
supplies as a hedge against inflation and because of uncertainty
over the contents of the food security bill.
Many fear the new food security scheme may bypass the
intended beneficiaries. Millions of tonnes of grain are wasted
in India due to, corruption, inadequate supply chains or storage
(Editing by Frank Jack Daniel and Yoko Nishikawa)