The government is likely to allocate around Rs 2.2 trillion towards food subsidy for 2024-25 in the interim Budget, 10% more than the outlay for the current fiscal. While the subsidy allocation for 2023-24 as per the budget estimate was Rs 1.97 trillion, an additional Rs 5000 crore was provided by the government last month.
Sources told FE a 10% hike in food subsidy expenses for next fiscal is projected, taking into consideration 7% increase in minimum support price (MSP) for wheat for 2024-25 marketing season (April-June) and the increase in MSP for paddy to be announced later.
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Over the last two fiscal years, MSPs of paddy and wheat witnessed increase in the range of 5-7% annually. The Food Corporation of India’s (FCI) economic cost for rice and wheat for 2023-24 is estimated to increase Rs 39.18/kg and Rs 27.03/kg, from Rs 35.62/kg and Rs 24.67/kg respectively in 2021-22.
Under the the Pradhan Mantri Garib Kalyana Anna Yojana (PMGKAY), 5 kg of rice or wheat are provided free of cost monthly to each of the 801 million beneficiaries. Before January 2023, marginal prices were paid by the beneficiaries, and the shift to a regime of completely free supply of grains raised the cost by 3-4%. The food subsidy bill had skyrocketed in FY22-FY23 because of a scheme that doubled the subsidised food grains supplies. The scheme was discontinued in December 2022.
The FCI in collaboration with state agencies procures and distributes more than 55 million tonne (MT) of wheat and rice annually under PMGKAY through 530,000 fair price shops across the country. Currently, the scheme is being implemented across all 36 states and Union Territories.
Sources said that Food Corporation of India (FCI) has projected an expenses of Rs 1.55 trillion under food security for FY25 against Rs 1.36 trillion is likely to be routed through the corporation in the current fiscal. Rest of food subsidy of around Rs 65,000 crore would be allocated to those states which follow decentralise procurement system.
The government has extended PMGKAY for five years till end of 2028 which would cost the exchequer around Rs 11.8 trillion due to a projected increase of 7%-8% in the MSP of the relevant crops – rice and wheat and coarse grains– annually, and other costs such as transportation, storage and incidentals.
Meanwhile, the finance ministry has released Rs 0.96 trillion crore towards food subsidy expenses in the current fiscal so far to the FCI, via which 70% of the subsidy funds are routed.
For the first time in the many years, the FCI has not availed the provision of short-term credit to meet its operational expenses in the current fiscal year, due to timely release of funds towards food subsidy expenses.
In April 2020, the government had launched PMGKAY in midst of the first Covid-19 wave to provide additional 5 kg of free foodgrain to each beneficiary under the NFSA in addition to 5 kg of grain at a highly subsidised rate of Rs 3/kg and Rs 2/kg for rice and wheat, respectively. The government has incurred an expenditure of over Rs 3.9 trillion under PMGKAY since its launch, with distribution of 111 MT of food grain so far.
