Further extension of free ration scheme PMGKAY? Here are pros and cons

Come September 30, and the Narendra Modi government will have to take a tough decision – whether to extend the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) or to let it lapse. The Centre had extended the scheme in March 2022 to provide free ration to the poor for another six months, till September 30, and this was included in the Budget food subsidy bill.

When confronted with this question on Monday (September 19), Food Secretary Sudhanshu Pandey said the Centre will take a call on extending the PMGKAY scheme but did not elaborate on when the decision is expected. He was speaking on the sidelines of the annual general meeting of the Roller Flour Millers Federation of India.

Asked about the Food Ministry’s view on extension, Pandey told reporters, “These are big government decisions…the government will take a call.”

Also read: Free rations helped to keep India’s poverty low during pandemic: IMF

Electoral considerations

As per reports, the Finance Ministry is unlikely to be in favour of extension. The decision, though, is to be taken by the Prime Minister’s Office (PMO). 

The government would like to continue with PMGKAY as it has proved to be electorally advantageous. It is widely believed that beneficiaries of the scheme voted for the BJP during Uttar Pradesh assembly elections, giving the party a second term in the state under Yogi Adityanath.

It will thus be hard for the government to end the scheme now, as Gujarat and Himachal Pradesh are slated to go to polls by year-end.

Also, as the festival season is round the corner, the government would like to extend the scheme. According to Bloomberg, the Centre is looking at options to keep this and some other schemes on “for at least another quarter until the festival season and local elections run through”.

Adding to subsidy bill

But keeping the scheme on would mean that the food subsidy bill would inflate further. According to Bloomberg, the Finance Ministry isn’t in favour of extending the programme as it adds pressure on a budget deficit that’s just starting to narrow from a record during the pandemic.

India’s food subsidy bill has shot up manifolds since 2020 and a key reason has been PMGKAY. The government spent ₹2.94 lakh-1 crore on food subsidy in 2021-22 — almost 140 per cent more than in 2020-21 and about 267 per cent more than in 2019-20.

In the Union Budget, Finance Minister Nirmala Sitharaman projected the FY23 food subsidy bill at ₹3.56 lakh-crore. But this figure does not take into account the rising prices of wheat and fertilisers due to the Russia-Ukraine war.

In March, the Centre extended the PMGKAY scheme by six months till September 30, and this was included in the Budget food subsidy bill. But a six-month extension now will add another ₹80,000 crore to the already inflated FY23 estimated food subsidy bill of ₹3.56 lakh-crore.

Niti-Aayog’s view

According to media reports, Niti-Aayog members are of the view the scheme should not be extended. As there are sufficient stocks of rice and wheat, the two key commodities offered under the scheme, these cannot be distributed free of cost for an extended period of time , the members are said to have pointed out. This is particularly since as the situation has returned to pre-pandemic levels.

The government has allocated over 1,003 lakh tonnes of free foodgrains under PMGKAY so far. Some experts believe that even if the government does not discontinue the scheme immediately, it might cut the size of the benefits given.

Multiple extensions

The PMGKAY was launched in March 2020 to provide free 5 kg food grains per person per month to about 80 crore beneficiaries covered under the National Food Security Act (NFSA) to reduce their hardship during the lockdown period. This was over and above the general allocation under the NFSA.

Also read: Heavy private purchases, strong exports keep wheat prices bullish

Initially, the PMGKAY scheme was announced only for a period of three months — April, May and June 2020. But with the COVID crisis continuing well into 2021-22, the scheme was renewed multiple times.