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Counterview: As PMGKAY Is Dumped, Will India See Through Free Subsidy Politics?

The Modi govt with its move to discontinue PMGKAY and make NFSA free will be able to save up on food subsidy costs.

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The official press release issued by the Press Bureau of India (PBI) on 23 December after a Cabinet meeting claimed that the Central Government would provide free foodgrains to about 81.35 crore beneficiaries under the National Food Security Act (NFSA) for one year from 1 January 2023.

Minister Piyush Goyal further asserted in the post-Cabinet meeting media briefing that the Centre would spend more than Rs 2 lakh crore in this period of one year on food subsidies. The government’s heart bleeds for the poor with Goyal duly claiming that this food subsidy would “remove the financial burden of the poor and the poorest of the poor."

The minister termed this, like every other decision of the Government, ‘a historic decision’ and wanted the press folks to note that this reflected the ‘sensitivity of the prime minister towards the beneficiaries of welfare schemes.'
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Govt’s COVID Excuse To Dispense With Excess Food Grain

The minister obviously spoke half-truth and silently buried a big decision taken with respect to other food security scheme— Prime Minister Garib Kalyan Anna Yojana (PMGKAY). Let me explain what was said and what was left unsaid.

The NFSA was enacted in 2013 to provide food security to the poor and deprived citizens of India. It considered the supply of foodgrains (rice/ wheat/ coarse grains) by the amount of 5 kg per person per month at a nominal price of Rs 3/2/1 per kg respectively as adequate to take care of their normative calorific requirement.

The NFSA Scheme had been in operation since 2014 and in 2020 when the pandemic struck India, was taking full care of the food security of the Indian poor. The government suddenly felt that the poor Indians need more food grains to take care of their bodies and announced PMGKAY to double the food grains for them in 2020.

There was no evidence that the calorific requirement of the people had increased on account of Covid 19. The warehouses of the Food Corporation of India (FCI) were, however, overflowing with foodgrains. There was no way these could have been disposed of. But the government decided to make a good bargain of the situation by disposing of the excess food grains through PMGKAY.
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NFSA In, PMGKAY Out

The central government in a rush, with a view to be seen as handing out a big benefit to the poor, launched the PMGKAY to provide additional 5 kg per person per month to all NFSA beneficiaries and that too at ‘free of cost’. The decision had the incidental advantage of disposing of FCI’s excess food grains and being seen as part of the big fiscal stimulus post-pandemic.

With this, the poor started getting 10 kg per person, with half food grains at Rs 3/2/1 per kg under NFSA and the other half completely free of cost under PMGKAY.

Central Government kept extending the PMGKAY. Last extension in September 2022 was made for three months which is ending on 31 December 2022.

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On 23 December, the Government made two decisions:

The first one was announced with big headlines and press statements. The foodgrains, which were being provided at Rs 3/2/1 per kg under NFSA, would be provided free of cost from 1 January 2023 for one year.

The other one was conspicuous only by the government’s complete silence. PMGKAY—the scheme which provided foodgrains free of cost, would not be extended beyond 31 December 2022.

The net effect of the decision is that the government would now provide 5 kg of foodgrains only instead of 10 kg of foodgrains per person per month. Further, the poor would be getting only 5 kg per person per month free of cost which they have been currently getting. In effect, the free-of-cost component of the PMGKAY has been subsumed in NFSA and the PMGKAY abandoned completely.
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Similar Food Quantity Allocation in a Fresh Package

Mr Piyush Goyal’s claim of a historic decision of providing food security to 81.35 crore people of India free of cost is also not quite true. Only, the name of the scheme under which this much foodgrain was provided free of cost has got changed from PMGKAY to NFSA.

Mr Goyal was only trying to be clever by half when he highlighted the NFSA foodgrains being made free of cost in place of the nominal cost of Rs. 3/2/1 per kg. He chose not to mention a word about discontinuing PMGKAY. It was mentioned only in the press release indirectly when it stated that the government made the free distribution of foodgrains under PMGKAY for 28 months.

Everyone can see through this game. Peddling such half-truths, in my judgement, belittles the credibility of the government and serves no real purpose.
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‘Modi Govt’s ’Freebie’ Politics a Means To Save Food Subsidies Cost’

The government has made NFSA foodgrains a classical and complete freebie.

The average economic cost of foodgrains (rice and wheat together) distributed under NFSA is about Rs. 30 per kg. At 5 kg per person per month to over 81 crore poor, the government needs approximately 50 million tons of foodgrains.

This quantity of foodgrains freely distributed costs the Government about Rs. 1.5 lakh crore per year as subsidy. Some other commitments like cheaper foodgrains to a few other categories of people take the food subsidy expenditure to about Rs. 2 lakh crore what Mr Goyal claimed.

Provision of NFSA rice/wheat/coarse grains free in place of Rs 3/2/1 per kg (or an average cost of Rs. 2.5 per kg of foodgrains) will cost the Government only about Rs 12,500 crore per annum.

The government was distributing about 35 million tons of food grains free of cost per annum under PMGKAY. The discontinuation of PMGKAY would save, on the other hand, food subsidy expenditure of about Rs 1.05 lakh crore annually. The government is making a neat saving of about Rs 92,500 crore per annum instead of spending Rs 2 lakh crore on food subsidy.
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The decision has, incidentally, however, made the foodgrains under NFSA free of cost for the first time and possibly forever. No future government would dare to charge any price (even nominal), henceforth.

To read the View on Govt's Free Food Extension under NFSA, click here.

(The Author is the Chief Policy Advisor, SUBHANJALI, Author: The $10 Trillion Dream and Former Finance and Economic Affairs Secretary, Government of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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