Eleventh Five Year Plan

134 Eleventh Five Year Planbetween the economic cost so fixed and the centralissue prices (CIP) is passed on to the State as foodsubsidy.4.1.28 The Decentralized Procurement Scheme, whichis presently in operation in 11 States, has been verysuccessful in increasing procurement of rice inmany non-traditional States, as can be seen below inTable 4.1.6.4.1.29 There is a need for States to increase procurementto reduce their requirement of foodgrains fromthe Central Pool. There is also a need for more Stateswith large production, such as Bihar for wheat and riceand Assam for rice, to adopt the Decentralized Procurementscheme. If this were to happen, there could be aconsiderable saving in terms of transportation costs.with higher MSPs declared more recently, there is adanger that the subsidy is likely to rise (see Table 4.1.7)due to increase in MSP, announcement of bonus, andcarrying cost of FCI. The Table 4.1.7 gives the figuresof food subsidy of the GoI.Public Distribution System4.1.32 The PDS is a major State intervention in thecountry aimed at ensuring food security to all thepeople, especially the poor. The PDS operates througha large distribution network of around 4.89 lakhfair price shops (FPS), and is supplemental in nature.Under the PDS, the Central Government is responsiblefor the procurement and transportation offoodgrains up to the principal distribution centresof the FCI while the State Governments are responsiblefor the identification of families living below theTABLE 4.1.6Procurement of Rice in DCP States during Kharif Marketing Season(Figures in lakh tonnes)S. No. State 2002–03 2003–04 2004–05 2005–06 2006–07*1 WB 1.26 9.25 9.44 12.75 5.192 UP 13.60 25.54 29.71 31.51 21.013 Chhattisgarh 12.91 23.74 28.37 32.65 25.204 Uttaranchal 2.32 3.23 3.61 3.36 1.745 A&N Islands - Neg. 0.01 - -6 Orissa 8.90 13.73 15.90 17.85 14.187 Tamil Nadu 1.07 2.07 6.52 9.26 10.387 Kerala - - 0.33 0.94 1.058 Karnataka - - 0.21 0.48 0.12Total (a) 40.06 77.56 94.10 108.80 78.86Note: *Position as on 19.04.07.Food Subsidy4.1.30 Food subsidy is provided in the Budget of theDepartment of Food and Public Distribution to meetthe difference between the economic cost of foodgrainsprocured by FCI and their sales realization at CIP forTPDS and other welfare schemes. In addition, theCentral Government also procures foodgrains formeeting the requirements of buffer stock. Hence, partof the food subsidy also goes towards meeting thecarrying cost of buffer stock.4.1.31 The food subsidy bill of the GoI peaked in2004–05 and declined as stocks declined. However,YearTABLE 4.1.7Food SubsidyFood Subsidy (Rs in crore)1996–97 51661997–98 75001998–99 87001999–2000 92002000–01 120102001–02 174942002–03 241762003–04 251602004–05 257462005–06 230712006–07 23827