Running the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in the current form for the next five years could necessitate a Budget outlay of Rs 11 trillion during the period in nominal terms, a government official said on Monday.
Under PMKKAY, 813 million people are currently being provided 5 kg each of specified grains per month free of cost. The free ration scheme was to end on December 2023, but prime minister Narendra Modi said on Saturday at an election rally in Chhattisgarh the scheme would run for another five years.
The cabinet committee on economic affairs is likely to approve extension of PMGKAY soon.
The additional budgetary cost of running the free ration scheme – rather than the NFSA in the previous form – for January-March quarter of the current fiscal could be around Rs 4,000 crore only. This is because under NFSA itself grains supplies used to be heavily subsidised.
The estimate of budget cost of PMGKAY extension for five years takes into account the economic costs likely to be incurred by the Food Corporation of India (FCI) and other agencies involved handling of the food stocks and public distribution.
FCI itself handles around 55-60 million tonne (MT) of food stocks annually. Economic cost of grains under the National Food Security Act includes payment of MSP to farmers, storage, transportation and other costs.
Under PMGKAY, the government’s annual expenditure on account of the food subsidy is estimated at around Rs 2 trillion at current prices.
Since last two fiscal years, MSPs of paddy and wheat witnessed an increase of 5-7% annually.
Correspondingly the FCI’s 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
Since January this year, the Centre has been providing free food grains (5 kg per beneficiary) to states for the scheme, initially valid till December 31 this year.
For FY24, Rs 1.97 trillion has been budgeted under this expense. However sources said that subsidy amount could decline a bit as FCI has sold more than 3 MT of wheat in the open market from its stocks, recovering a part of costs.
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, benefiting around 813 million individuals.
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 foodgrain so far.