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FCI’s food subsidy expenses likely to decline next fiscal, if PMGKAY is not extended

In the current fiscal, the finance ministry has already allocated Rs 1.46 lakh crore to FCI by December 31, 2021 and rest of expenses in the current fiscal would be provided for ensuring that FCI’s balance sheet remains free from outstanding payment.

Under the PMGKAY, an additional foodgrain of 5 kg per person per month is being supplied to more than 80 crore beneficiaries free of cost, besides highly subsidised foodgrain supplies of similar quantity under the National Food Security Act.
Under the PMGKAY, an additional foodgrain of 5 kg per person per month is being supplied to more than 80 crore beneficiaries free of cost, besides highly subsidised foodgrain supplies of similar quantity under the National Food Security Act.

By Sandip Das

Food subsidy expenses incurred by the Food Corporation of India (FCI) is likely to decline by around 42% to Rs 1.3 lakh crore in 2022-23 from around Rs 2.28 lakh crore anticipated in the current fiscal, if the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) is not extended beyond March 31, 2022.

Under the PMGKAY, an additional foodgrain of 5 kg per person per month is being supplied to more than 80 crore beneficiaries free of cost, besides highly subsidised foodgrain supplies of similar quantity under the National Food Security Act.

PMGKAY was launched as part of the economic response to Covid-19 in April 2020. In the current fiscal, PMGKAY is being implemented during May-March (2021-22) and the scheme has been implemented in five phases since its launch.

Sources said that an additional expenditure under food subsidy of around Rs 53,344 crore is estimated under the Phase V of PMGKAY is currently being implemented during December, 2021 – March, 2022. The government’s total expenses under the PMGKAY since its launch in April 2020 is likely to be around Rs 2.60 lakh crore.

In the current fiscal, the finance ministry has already allocated Rs 1.46 lakh crore to FCI by December 31, 2021 and rest of expenses in the current fiscal would be provided for ensuring that FCI’s balance sheet remains free from outstanding payment.

Meanwhile, the economic costs of procurement by FCI which include expenses such as Minimum Support Price (MSP) payment to farmers, procurement, acquisition and distribution costs etc have declined by 8.68% and 8.49% respectively for rice and wheat to Rs 3597.17 and Rs 2,499.69 per quintal respectively in 2021-22 compared to previous fiscal.

This has been possible because of the finance ministry’s provisioning of Rs 3.4 lakh crore in the revised budget estimate of 2020-21, which enabled FCI to pay back loan worth of Rs 3.39 lakh crore availed from NSSF, thus saving on the interest expenditure of Rs 25,000 crore in the current fiscal.

Previously the expenditure towards food subsidy has been on the rise due to annual increases in the minimum support prices (MSP) for paddy and wheat and an ‘open-ended’ purchase operations leading to grain stocks much in excess of buffer levels with FCI. The central issue prices of Rs 3, Rs 2 and Rs 1 for a kg of rice, wheat and coarse grains, respectively, under NFSA has not been revised since 2013.

The food subsidy expenditure also rose because of implementation of PMGKY and the corporation holding on to excess rice and wheat stocks compared to the buffer norm. As on January 1 2022, FCI had a grain stock of 55.16 million tonne (MT) against the buffer stock norm of 21.41 MT.

FCI is the key central agency that manages procurement, storage and transportation of rice and wheat to states for distribution mainly for the NFSA and other welfare schemes.

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