Cabinet nod: Free grains scheme under PMGKAY extended till November end; total cost seen at Rs 94,000 crore

In FY21, when a similar scheme was run, the government spent Rs 1.2 lakh crore on PMGKAY.

The Cabinet on Wednesday approved extension of free food grains distribution under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) to over 80 crore people for another five months till end of November. The scheme that was initially rolled out for two months (May-June) would now entail a total expenditure of about Rs 94,000 crore for the seven-month period.

The PMGKAY was re-introduced amid the second wave of the Covid-19 pandemic with the objective to minimise the hardships of most vulnerable sections of the society.

The Centre would extend the validity of the PMGKAY programme till Diwali, Prime Minister Narendra Modi had announced on June 7. Under the scheme, all the beneficiaries under the National Food Security Act (NFSA) are entitled to receive same amount of rice and wheat – 5 kg per person per month – extra, free of cost. While the PMGKAY expenditure for May-June was estimated at Rs 26,602 crore, the food ministry has pegged Rs 67,266 crore to be spent during July-November. The total foodgrains requirement for seven months may be about 284 lakh tonne.

In FY21, when a similar scheme was run, the government spent Rs 1.2 lakh crore on PMGKAY.

“No poor family will suffer on account of non-availability of food-grains due to disruption in the next five months. Additional allocation will ameliorate the hardships faced by poor due to economic disruption caused by coronavirus,” the government said in a statement after cabinet approval.

The additional spending will be offset by nearly half by the extra amount of Rs 50,000 crore received from the 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. The food subsidy allocation for FY22 (BE) is Rs 2.43 lakh crore.

“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,” India Ratings chief economist DK Pant had said. There will be limited impact of this free grains programme’s extension 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.

As much as 593 lakh tonne of wheat and 294 lakh tonne of rice (total 887 lakh tonne of food grains) are available under Central Pool as on June 21. The Centre is hopeful of 100% lifting under PMGKAY by end of this month as states and union territories have already lifted 96% of 80 lakh tonne allocated during May-June.

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