Subsidy Current Affairs - 2019
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With wheat production at record high, government has raised import duty on wheat from existing 30% to 40% to support local farmers interest. The higher duty will help offtake of domestically produced grain by discouraging milers to import wheat but to buy local produce and help protect farm prices. The oversupply in domestic market due to back to back bumper production of food grains has put wheat prices under pressure.
- India’s wheat production for 2018-19 crop year (which runs from July to June) is 2% higher than 2018, at a recored production of 99.12 million tonnes.
- Food Corporation of India (FCI) which holds government’s wheat stocks already had 16.99 million tonnes in April and after next purchase by government its stock could reach 57 million tonnes by May end.
- Reason for bumper production: In a bid to improve farm income government raised minimum support price (MSP) of wheat (rate at which FCI buys from farmers) by 6% (Rs.1,840 per 100 kg for 2019), which acted as a benchmark for open market in wheat.
- For similar bumper crop in 2018, government increased import duty on wheat from 20% to 30% which resulted in sharp drop in wheat import.
- In past India has imported wheat from Australia, Ukraine and Russia, but with global prices in addition to 40% duty would make import virtually impossible.
- Earlier, in concern of its farm duty rates as well as on subsidies it gives to farmers,
- In past Australia has taken India to WTO’s arbitration panel on its farm duty rates and subsidies given to farmers, but it hardly affects because India by right can raise duties on wheat up to 80% under a bound rate agreement it has signed at WTO.
Wheat is India’s staple food, placed second to rice. Uttar Pradesh is the largest wheat producing state in India followed by Punjab, Haryana, Madhya Pradesh. India is second largest producer of wheat in the world. China is world’s largest producer, followed by India, Russia, and the United states.
Food Corporation of India
It is a statutory non-profit organization founded and run by Government of India and also run by state Governments. It was created in 1965 under Food Corporations Act 1964, to implement objectives of National Food Policy. Initially headquartered at Chennai it was later shifted to New Delhi. As it is a state-owned enterprise, it has presence in every state in India.
- Safeguarding farmers interests by providing them remunerative prices.
- Making food grains available at reasonable prices throughout the country (for public distribution system), particularly for vulnerable section of society.
- Intervening in market for price stabilization.
- Maintaining buffer stocks as a measure of Food Security.
The Union Government has decided to introduce Direct Benefit Transfer (DBT) system for fertilizer subsidy payments.
Under the proposed system, 100% subsidy on various fertilizer grades will be released to the manufacturers and importers on basis of actual sales made by the retailer to the beneficiaries.
- Initially, the modified subsidy procedure under DBT system will be introduced on pilot basis in 16 select districts.
- In the second phase, the new payment system will be rolled out in all states only after its due stabilization in first phase.
- The proposed DBT will address the issues relating to diversion and smuggling of urea.
How DBT system for fertilizer subsidy is different?
- The DBT in fertilizer sector being implemented is slightly different from the normal DBT implemented in LPG subsidy.
- Under it, the subsidy will be released to the fertilizer companies instead of the beneficiaries, after the sale is made by the retailers to the beneficiaries.
- The subsidy will be released on submission of claims generated in the web-based online Integrated Fertilizer Monitoring System (iFMS) by fertilizer companies.
- It will reduce diversion and smuggling of fertilizers to a large extent. Thus, it will help Government to save subsidy to the some extent.
- The fertilizers will be available to all on ‘no denial’ basis and release fertilizer subsidy to fertilizer companies has no direct relation with landholding of the farmers.