Finance ministry postpones changes to food and fertiliser subsidies

Agriculture: The finance ministry has decided to indefinitely postpone the proposed changes to food and fertiliser subsidies, fearing that these reforms will further alienate farmers and the poor.

“We have just carried forward with the food and fertilizer subsidy programmes for FY 2022 (even) though they are becoming unsustainable. The timing is not right for any reform in these subsidies,” a finance ministry official told Livemint on condition of anonymity. The Union Budget for 2021-22 has allocated INR 2.4 trillion for food subsidy and around INR 80,000 crore for fertiliser subsidies.

The government has not been able to revise the price of subsidised foodgrain provided under the public distribution system (PDS) since 2013 nor has it been able to ensure the direct transfer of fertiliser subsidies to farmers beyond a few pilot projects. However, with the cost of procuring wheat and rice from farmers by the Food Corporation of India (FCI) going up over the years, the food subsidy has increased significantly.

Meanwhile, both the Economic Survey 2020-21 and the 15th Finance Commission have raised concerns over the growing burden of both subsidies. The Economic Survey said the food subsidy bill is becoming ‘unmanageably large’. “While it is difficult to reduce the economic cost of food management in view of rising commitment towards food security, there is a need to consider the revision of CIP (central issue price) to reduce the bulging food subsidy bill,” it added.

CIP is the price at which beneficiaries of the National Food Security Act (NFSA) purchase rice through the PDS. The CIP has not been revised since the introduction of the NFSA in 2013, when wheat was priced at INR 2 per kg, and rice at INR 3 per kg.

Read this article on how to make Direct Benefit Transfers work for recipients.

Fundraising & Communications: The Ministry of Home Affairs (MHA) has issued a circular extending the validity of FCRA registration certificates to September 30th, 2021. This applies to all FCRA licences that have expired or will expire between September 29th, 2020 and May 31st, 2021. The decision to extend the deadline has been driven by the exigencies arising from the COVID-19 situation.

FCRA refers to the Foreign Contribution (Regulation) Act 2010, which permits charitable organisations based in India to raise funds from foreign sources.

The order also clarified that nonprofits that have already opened an account and have the requisite permission to receive foreign aid, can henceforth receive it only in these newly-opened accounts.

The FCRA law was amended in September 2020 to include a clause that mandated that all nonprofits receiving foreign aid must necessarily open an account in State Bank of India’s New Delhi Main Branch. The government had initially set the deadline for this account opening as March 31st, 2021; it later extended it to June 30th, 2021 after several nonprofits argued in court that there had been delays because necessary approvals from MHA had not been received.

Several organisations have not been able to receive foreign funds during the crisis caused by the second wave, and this has impacted their COVID-19 relief efforts. Relaxing the foreign funding rules could significantly help organisations ramp up their operations to help individuals, supply critical healthcare equipment, and respond to communities in rural areas.

Read this article to know how amending the FCRA can have unforeseen implications.

Philanthropy & CSR: The Ministry of Corporate Affairs (MCA) has issued a circular that allows corporate spending on health infrastructure for COVID-19 care to qualify as corporate social responsibility (CSR) expenditure.

This includes setting up medical oxygen generation and storage plants, manufacturing and supply of oxygen concentrators, ventilators, cylinders, and other medical equipment to counter COVID-19.  

The announcement comes at a time when all efforts are being directed towards expediting efforts to support the country’s healthcare infrastructure.

According to the circular, companies can now undertake projects and activities in collaboration with other companies using CSR funds. Additionally, they can contribute to specified research and development projects, as well as publicly funded universities and certain organisations that conduct research in science, technology, engineering, and medicine.

The government had earlier clarified that setting up makeshift hospitals and temporary COVID-19 care facilities would also be considered a CSR activity. Rajesh Verma, the Corporate Affairs Secretary, has requested businesses to consider converting vacant office buildings into COVID-19 facilities to cater to the rapidly increasing caseload.

Read this article to understand why media attention on COVID-19 deaths due to lack of oxygen in big cities has skewed donor priorities.