A panel headed by the PM's chief economic advisor C Rangarajan has recommended exporting 2 million tonnes (mt) of wheat at a subsidy of Rs 1,500 crore through government channels and another 1 mt through private traders at a subsidy of Rs 150 crore.
Warning that just exports would not be enough to manage the overflowing godowns and could cause political problems, the panel has also recommended distribution of 8 mt grain to below poverty line (BPL) and 2 mt to above poverty line (APL) families. The total subsidy bill for this would come to Rs 17,000 crore.
The PM had asked the Rangarajan-headed inter-ministerial committee to look into the issue after finance minister Pranab Mukherjee, heading the group of ministers, had shot down the proposal to distribute 10 million tonnes of grains because of fiscal constraints.
Now, Rangarajan has advised the PMO that the government should export 2 million tonnes of grains through state agencies. Considering that international price of wheat is much lower than the cost of domestic procurement, the panel has assessed that the exports will cost the government a subsidy of Rs 1,500 crore. Another one million tonnes of grains that it recommended should be shipped out by private traders would entail a subsidy of Rs 150 crore.
Rangarajan noted that discussions were on for exports to Iran and other countries could be considered through various state agencies though this would not be enough to manage the bulging stocks which are likely to reach 75 mt by the beginning of June.
Pointing also to the political implications of exporting and not distributing grains to the poor, he has recommended providing 8 million tonnes to those with BPL cards and 2 million tonnes to those with APL cards. Another 1 million tonnes should be sold in the open market, he said. The food ministry had recommended 10 million tonnes to be given to APL card holders but Rangarajan has gone with a much lower figure.
The subsidy on exports could go higher and could be politically difficult. Countries in the Black Sea region are expected to come into the international market soon and Russian wheat already available at a substantially lower price than the Indian variety could complicate matters.
Mindful of this and currency fluctuations, Rangarajan has said the final actual subsidy bill should be reassessed by the government while taking a decision.