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Friday, July 03, 2020

PMGKAY cost put at Rs 1.5 lakh crore, actual expenditure may be Rs 50k crore less

Analysis of data from the Department of Food and Public Distribution’s Foodgrain Bulletin for May shows the actual net outgo to be much lower.

Written by Harish Damodaran | New Delhi | Updated: July 1, 2020 11:23:17 am
Workers at a fair price shop prepare to distribute ration under PMGKY in New Delhi on Tuesday. (PTI)

Prime Minister Narendra Modi has said that extending the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) — which provides 5 kg rice or wheat per month to 80 crore persons, plus 1 kg pulses to their families, free of cost — until November will cost the exchequer over Rs 90,000 crore. This, along with the Rs 60,000-crore supposedly spent under the scheme during April-June, would take the total to Rs 1,5 lakh crore.

But analysis of data from the Department of Food and Public Distribution’s Foodgrain Bulletin for May shows the actual net outgo to be much lower.

Consider 5 kg of cereals given free to 80 crore people, which adds up to 12 million tonnes (mt) over three months (April to June). Extending it till November would mean additional 20 mt.

Read| Mamata Banerjee announces free ration in West Bengal till July 2021

According to the Foodgrain Bulletin data, Food Corporation of India is projected to incur a cost of Rs 37.27 for procuring and distributing every kg of rice in 2020-21, and Rs 26.84 per kg in the case of wheat. The 12 mt allocated during April-June included 10.44 mt rice and 1.56 mt wheat. The total economic value of this grain given out free would, therefore, have been just over Rs 43,100 crore.

The above economic cost does not account for expenses on holding and maintaining excess grains in its godowns. This “carrying cost” — basically interest and storage charges” — is estimated at Rs 5.40 per kg for the current fiscal. As on April 1, rice and wheat stocks in the Central pool, at almost 74 mt, were three-and-a-half times the required operational-cum-strategic reserve levels. With procurement of new wheat crop, these inventories had further risen to 97 mt-plus.

pm modi, pm modi address to nation, Modi extension ration scheme, Pradhan Mantri Garib Kalyan Anna Yojana, PMGKAY scheme, PMGKAY scheme benifits Consider 5 kg of cereals given free to 80 crore people, which adds up to 12 million tonnes (mt) over three months (April to June). Extending it till November would mean additional 20 mt.

Carrying cost of Rs 5.40/kg on 12 mt of grain, which was clearly “excess”, would have worked out to around Rs 6,480 crore. Even after adding the roughly Rs 3,900 crore spent on providing 1 kg free pulses per month for 20 crore families — the average cost of procuring, storing, milling, packing and distribution here is pegged at Rs 65/kg — the net outgo under PMGKAY during April-June would have been Rs 40,500 crore, not Rs 60,000 crore.

Explained| Understanding PM Garib Kalyan relief package: its components, and some perspective on implementation

In the additional 20 mt cereals to be provided free during July-November, the economic cost — taking 10 mt rice and 10 mt wheat — will come to approximately Rs 64,100 crore. Again, deducing the carrying cost of Rs 5.40/kg on 20 mt will reduce that outgo by Rs 10,800 crore. After adding the economic cost of Rs 6,500 crore on one mt of pulses, at Rs 65/kg, the Centre’s net expenditure will be below Rs 60,000 crore.

In other words, total effective burden on the exchequer from PMGKAY may be only in the region of Rs lakh crore to Rs 1.05 lakh crore, and not Rs 1.5 lakh crore.

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