Rice stocks in the central pool are likely to plunge below the buffer norm by 2.2 million tonne (MT) or 16%, if the free ration scheme – Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) – is extended to the whole of the second half of the current financial year, the ministry of food and public distribution has cautioned.
Running the scheme for October-March FY23 with the current grain composition will cost the exchequer a massive Rs 90,000 crore if not higher, the ministry said in an internal note, reviewed by FE.
Earlier, the expenditure department of the finance ministry, too, had expressed concern over the high budgetary cost of PMGKAY and argued against extending it beyond September.
Since the open-ended procurement of grains started in 2013-14 under the National Food Security Act (NFSA), food stocks haven’t fallen below the buffer levels. The actual rice stocks haven’t plunged below the buffer requirement at least since 2000 while depletion of wheat stocks led to imports in 2006.
Launched in 2020 as part of the Covid-19 relief measures, 5 kg of grains are distributed free under PMGKAY to more than 800 million beneficiaries every month free of cost. Additionally, these people also get an equal quantity of highly subsidised food grains under the NFSA.
When the scheme was extended for April-September period of the current financial year, the government estimated its cost at 80,000 crore. But, due to lower wheat stocks, rice component of the scheme was enhanced by 80% effective May. This led to an additional cost of over5,000 crore given that ‘economic cost’ is higher than that of wheat.
The food ministry has estimated rice stocks with the Food Corporation of India (FCI) as on April 1, 2023 will be around 11.4 MT against the buffer norm of 13.6 MT, if the PMGKAY is implemented during the second half of FY23. Wheat stocks, if the current grain composition under the scheme is not altered, would be around 9 MT against the buffer of 7.4 MT on April 1, 2023.
The buffer norm includes operational stocks and strategic reserves.
On July 1, wheat stocks in the central pool stood at 28.5 MT against the buffer norm of 27.5 MT, the lowest since 2008.
In the rabi marketing season (April-June) for 2022-23, wheat procurement by FCI dropped by more than 56.6% to 18.7 MT against 43.3 MT purchased from the farmers in the previous year. Lower procurement has been attributed to decline in production because of heat waves during the flowering stage of the crop in March.
According to agriculture ministry data, wheat output in the 2021-22 crop year (July-June) declined by around 3% on year to 106 MT.
However, rice stocks as on July 1, 2022 with FCI was 31.5 MT against buffer norm of 13.5 MT. The government has purchased more than 58 MT of rice in the 2021-22 season (October-September) while in the previous year rice procurement was a record 60 MT
The government had revised the norms for phase VI of PMGKAY in May by allocating around 11 MT of more rice while reducing wheat allocation by the same quantity. For six months, the total grain requirement for PMGKAY is around 26 MT.
The low grains surplus has prevented FCI from doing open market sales in the current fiscal year, contrary to the trend of recent years.
The government placed curbs on exports of wheat in May, even as the global markets looked very remunerative to exporters. The move was in view of local supply constraints.
The economic cost of foodgrain procurement by the FCI, which includes expenses such as minimum support price payment to farmers, procurement, acquisition and distribution costs etc. for rice and wheat are estimated at Rs 3,670 and Rs 2,588 per quintal, respectively, for 2022-23.
The government distributes rice and wheat to beneficiaries under NFSA at Rs 3 and Rs 2 per kg, respectively.