Central assistance to States/Union Territories (UTs) under National Food Security Act for meeting expenditure on intra-State movement & handling of foodgrains and Fair Price Shop (FPS) dealers’ margin

No: --- Dated: Mar, 25 2015

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has approved the  norms of the expenditure and pattern of central sharing on Central assistance to States/Union Territories (UTs) under the National Food Security Act, 2013 (NFSA).  This assistance is used for meeting expenditure on intra-state movement and handling of foodgrains and FPS dealers’ margin.

The norms of expenditure and pattern of Central sharing will be as follows:

The special category States/UTs are the seven States of North East, Sikkim, the Hill States of Himachal Pradesh, Jammu & Kashmir and Uttarakhand and Island UTs of Andaman & Nicobar Islands and Lakshadweep.

This decision will help in the smooth implementation of the NFSA and will benefit the people.

The assistance will be available to States/UT where implementation of NFSA has started. The estimated financial assistance likely to flow to States/UTs annually, when the Act is fully implemented in all States/UTs, is Rs. 4,341 crore. 

Accepting the recommendations of the 14^th Finance Commission the Government had hiked the share of States in Central taxes, from 32 percent to 42 percent, increasing availability of funds at their end. Inspite of the reduced share of Govt. of India, the GOI has agreed to this additional burden in the cost of transportation of foodgrains and margins to fair price shops to ensure that the beneficiaries will continue to get foodgrain at subsidised prices.

Implementation of NFSA has so far started only in 11 States/UTs. The period for identification of beneficiaries and implementation of the Act had to be extended twice, upto 04.04.2015 as its implementation is yet to start in the remaining 25 States/UTs. It has again been extended upto 30.09.2015 and it is expected that this decision on Central assistance will incentivise the States/UTs for early roll out of the Act.

Background:

The National Food Security Act came into force with effect from 5th July, 2013. It, amongst other things, provides for legal entitlement to two-thirds of the population to receive foodgrains at highly subsidized prices of Rs. 1/2/3 per kg for coarse grains/wheat/rice respectively

Coverage of beneficiaries under pre-NFSA TPDS is under three different categories of beneficiaries – Antyodaya Anna Yojana (AAY), Below Poverty Line (BPL) and Above Poverty Line (APL).   Central Issue Prices (CIPs) for these categories of households are   different. However, the States/UTs have been given flexibility to pass on the expenditure incurred by them on intra-State movement of foodgrains and dealers margin of fair price shops to beneficiaries (except AAY beneficiaries). Accordingly, many States/UTs are distributing foodgrains to beneficiaries under  Targeted Public Distribution System (TPDS) at prices higher than the CIPs.

NFSA provides that beneficiaries across the country will receive foodgrains under NFSA at uniform subsidized price. States/UTs, therefore, do not have the flexibility to pass on the expenditure incurred by them on intra-State movement of foodgrains and fair price shop dealers margin to beneficiaries.