Free foodgrain scheme extension won’t affect buffer stock, but costs govt 81,000cr.
If the government wants to prolong the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for another six months after its expiry date in September, there will be no shortage of foodgrains in the Central pool stock. The biggest problem, however, is the financial cost of extending the scheme, which will cost 81,000 crores.
The pool’s stock
According to an internal Food Ministry study, if the free foodgrain scheme is extended through March 2023, wheat stocks will be 90-95 lakh tonnes (lt) and rice stocks will be 125-130 lt (from the current level). Wheat and rice have buffer norms and strategic reserves of 74.6 lt and 135.8 lt, respectively.
‘Even after PMGKAY’s extension, the wheat stock will be clearly above the buffer norm on April 1. There would be no difficulty with rice because the Kharif harvest will be procured from October in the new marketing year (October-September),’ an official said, adding that rice stock calculations as of April 1 had not taken into account the additional amount to be procured. The rice purchase strategy for the 2022-23 marketing year will be finalized at the meeting with states next month, he said.
According to sources, PMGKAY will require approximately 43 lt of wheat and approximately 196 lt of rice for the six months from October to March. They further noted that there is an estimate made on the stock to be consumed if PMGKAY is continued over the festival time, particularly between October and December.
According to the sources, the government is also considering releasing some wheat under the open market sale system (OMSS) if PMGKAY is prolonged for three months due to enough supply. ‘Whether OMSS or PMGKAY, both will improve open market availability, but the government will make the final decision,’ the official said.
Revisions to allocation
When the program was introduced, the government anticipated that it would cost Rs. 80,850.67 crores for the first six months (April-September) of the current fiscal year. However, after procurement dropped, the government altered the allocation in May, replacing 11.09 lt of wheat with rice every month. It may boost the budget by about 6,000 crores because the anticipated difference in economic costs between wheat and rice is 1,081.34/quintal.
In response to a question in Rajya Sabha last week on if there has been a rethinking of continuing the scheme beyond September on fiscal grounds, Sadhvi Niranjan Jyoti, Minister of State for Food, said, ‘The scheme is reviewed from time to time for the suitable decision.’
She went on to say that, as of July 31, a total of 824 lt free foodgrains had been provided through PMGKAY, with a total subsidy cost of roughly 2.79 lakh crore since its inception.
Following the Covid-19 outbreak, the Centre declared in April 2020 that ‘extra’ and ‘free-of-cost’ foodgrains (rice/wheat) would be distributed to about 80 crore beneficiaries of the National Food Security Act (NFSA) in the country under PMGKAY.