January 31, 2020 / 7:50 AM / 23 days ago

India's food ministry seeks over $28 billion for food subsidies - sources

NEW DELHI (Reuters) - India’s food ministry has sought more than 2 trillion rupees ($28.1 billion) to run the world’s biggest food welfare programme in the fiscal year beginning April 1, three government sources said.

FILE PHOTO: An India Rupee note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

But the government is likely to earmark only around 1.90 trillion rupees, they added.

“The finance ministry may not be able to allocate more than 1.9 trillion rupees in the budget,” one source - an official - said.

Details on the level of subsidy will be made public when Finance Minister Nirmala Sitharaman presents the 2020/21 budget on Saturday.

An inadequate allocation could force the state-run Food Corp of India, the main grain procurement agency, to borrow up to $2 billion outside of the budget, said the same official.

A spokesman for the finance ministry was not immediately available for comment.

In fiscal 2018-19, the government earmarked 1.71 trillion rupees for food subsidies but eventually allocated only 1.02 trillion rupees. As a result, Food Corp had to borrow from the market, pushing its overall external borrowings to 2.19 trillion rupees ($30.81 billion) as of Oct. 31, 2019, according to disclosures made in Parliament.

Despite an allocation of 1.84 trillion rupees for the current fiscal year to March, a resource crunch could again force the government to cut the payout to Food Corp, said the three officials, who asked not to be named due to the sensitivity of the matter.

India is likely to fund roughly $28 billion of its expenditure outlay in the upcoming budget for 2020/21 via off-budget borrowings, as it seeks to revive a sagging economy while keeping its fiscal deficit in check.

Under the National Food Security Act, Food Corp buys rice and wheat from farmers at a guaranteed price and sells the staples to 67% of India’s 1.3 billion people at about one-tenth of the market price.

Since coming to power in 2014, Prime Minister Narendra Modi has more than doubled food subsidies, making it the government’s biggest line item after defence.

Reporting by Mayank Bhardwaj and Manoj Kumar; Editing by Euan Rocha, John Stonestreet, Kirsten Donovan

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