Despite Finance Ministry’s red flags over free ration scheme, Modi Cabinet go ahead | The Financial Express

Despite Finance Ministry’s red flags over free ration scheme, Modi Cabinet go ahead

“Continuation of this (PMGKAY) over a long period of time may give an impression of its permanent or indefinite continuation and make it difficult to stop,” the expenditure department in the ministry said, while asking for termination of the scheme on September 30, 2022.

Despite Finance Ministry’s red flags over free ration scheme, Modi Cabinet go ahead
The finance ministry in its note also observed that “already there is a fiscal pressure due to the Russia-Ukraine war, (its) effect on fuel prices, rise in other subsidies, etc”.

The Cabinet’s decision to extend the free ration scheme was despite the finance ministry’s objection. In an office memorandum dated September 26, it conveyed to the ministry of consumer affairs, food and public distribution, which had pitched for continuance of the scheme till the end of 2022, that since “the pandemic has abated considerably and the distress for which this relief – PMGKAY – was given does not appear to be prevalent”, the latter’s proposal “is not supported”.

The finance ministry also stated that there may not be adequate grain stocks to continue with distribution under PMGKAY indefinitely, as the global food stocks have considerably tightened in the wake of the war in Ukraine. “Continuation of this (PMGKAY) over a long period of time may give an impression of its permanent or indefinite continuation and make it difficult to stop,” the expenditure department in the ministry said, while asking for termination of the scheme on September 30, 2022.

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Till now, the government’s expenditure on the scheme launched in April 2020 to provide free food grains of 5 kg/month to to 800 million beneficiaries under the National Food Security Act (NFSA) has been around Rs 3.45 trillion. With an additional Rs 44,762 crore for running the scheme in the October-December 2022 period, the scheme’s total cost will rise to Rs 3.91 trillion.

The finance ministry in its note also observed that “already there is a fiscal pressure due to the Russia-Ukraine war, (its) effect on fuel prices, rise in other subsidies, etc”.

FE had earlier reported that the finance ministry would make a strong pitch for imposing a ceiling on annual food subsidy expenses, the relentless rise of which has become an unsustainable fiscal obligation over the last few years. It may suggest ending the open-ended nature of the heavily subsidised grain supplies under the National Food Security Act, 2013, and ways to bring down the rising economic costs of rice and wheat as incurred by the Food Corporation India (FCI).

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