Govt needs to spend additional Rs 1 lakh crore to distribute free foodgrain under PMGKAY till Diwali

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June 09, 2021 4:00 AM

This apart, Monday’s announcement by the government to take over vaccine procurement responsibility from states and provide the prophylactics free of cost to those in the age group of 18-44 years will cost the exchequer an extra Rs 5,000-10,000 crore over the respective BE of Rs 35,000 crore, the source added.

The Centre will extend the validity of a programme to distribute free grains to 80 crore people until Diwali from June, Prime Minister Narendra Modi said on Monday.The Centre will extend the validity of a programme to distribute free grains to 80 crore people until Diwali from June, Prime Minister Narendra Modi said on Monday.

The Centre will require to spend an additional Rs 1 lakh crore to distribute free foodgrain to 80 crore people under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) till November 4 (Diwali) this fiscal. While the total cost of the programme is estimated at Rs 1.25 lakh crore, some Rs 25,000-crore savings from the budget estimate (BE) of food subsidy in the year from clearance of a part of arrears meant to be cleared in the current fiscal, in March 2021 itself, would reduce the net outgo to nearly Rs 1 lakh crore, an official source said.

This apart, Monday’s announcement by the government to take over vaccine procurement responsibility from states and provide the prophylactics free of cost to those in the age group of 18-44 years will cost the exchequer an extra Rs 5,000-10,000 crore over the respective BE of Rs 35,000 crore, the source added.

The additional spending will be offset by nearly half by the extra amount of Rs 50,000 crore received from RBI as surplus transfer. In the FY22 Budget, the government had factored in clearance of some food subsidy arrears in FY22, but the actual food subsidy spend in FY21 was Rs 5.25 lakh crore, Rs 1 lakh crore more than the revised estimate (RE); the FY21 spend included some part of arrears which were earlier planned to be cleared in FY22. In FY21 too, Rs 1.2 lakh crore was spent on PMGKAY.

The Centre will extend the validity of a programme to distribute free grains to 80 crore people until Diwali from June, Prime Minister Narendra Modi said on Monday.

The Centre spent about Rs 6,500 crore so far in FY22 for vaccination while full-year budget expenses are seen around Rs 40,000-45,000 crore. “Roughly, Rs 6,500 crore has already been spent on vaccines till June 7 of this fiscal. The value of total orders placed is much higher though,” the official said.

“Because of lower economic growth expectations than what was before the second wave of Covid, there will be some impact on tax collections. However, looking at the May (for April transactions) GST collection numbers which was over Rs 1 lakh crore and the higher dividend by RBI will help in bridging the additional funding requirement in FY22.

The expenditure reprioritisation may take place this year also if there is more deficit,” said India Ratings chief economist DK Pant. He sees limited impact of Monday’s announcements on the government’s FY22 borrowing programme.

In May, the RBI board approved transfer of Rs 99,122 crore to the Union government for nine months ended March 2021 as the central bank shifted its accounting year to April-March from FY21 from July-June earlier.

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