Opinion Why the Centre is right in not extending the Pradhan Mantri Garib Kalyan Anna Yojana scheme

The Narendra Modi government has done the right thing by not extending the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) beyond December. The scheme, which provides 5 kg of foodgrains per month to about 81.35 crore people free of cost over and above their National Food Security Act (NFSA) entitlement of 5 kg per person per month at Rs 2-3/kg, was neither physically nor fiscally sustainable. A monthly ration of 10 kg (5 kg each under NFSA and PMGKAY) for 81.35 crore persons translates into nearly 100 million tonnes (mt) or over a third of India’s total cereal production. The current stocks of rice and wheat in the Central pool, at 55.46 mt on December 1, are a third lower than a year ago. There isn’t that much grain in the Food Corporation of India’s warehouses today to distribute as was possible during the post-Covid lockdown period. And with economic activity normalising, there’s no necessity either.

While discontinuing PMGKAY, the Modi government has, at the same time, decided to make available the 5 kg/person/month grains under NFSA free of cost for one year from January 2023. The fiscal implications shouldn’t be too high; there’s not much difference really between issuing 50 mt of wheat/rice at Rs 2-3/kg and giving it out free. Politically, it is a shrewd move replete with symbolism — which the ruling BJP will milk in the coming state elections and the general election in 2024. The NFSA, enacted in 2013 by the previous Congress-led UPA regime, made access to subsidised grain a legal right for up to three-fourths of India’s rural and half of its urban population. The Modi government has taken it one step further. NFSA beneficiaries will, henceforth, receive not just subsidised grain but free grain. So long as this is limited to 5 kg — roughly half of the average monthly per capita cereal consumption as per the last National Sample Survey data for 2011-12 — it can be considered a reasonable entitlement.

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If only 50 mt of grain is required under the NFSA, and another 10-15 mt for other welfare schemes plus a buffer stock, government agencies don’t need to procure more than 60-65 mt annually. Actual procurement, however, has averaged 90-100 mt (55-60 mt rice and 35-40 mt wheat) in recent times, the last wheat marketing season being an anomaly due to a poor crop. The gap between the two is what has led to overflowing public godowns becoming the rule rather than the exception. It’s time to dispense with the existing open-ended procurement of paddy and wheat at minimum support prices. All farm price support and input subsidies should be replaced with per-hectare income transfers, which will complement the limited grain entitlement for poor and vulnerable consumers under the NFSA.