Despite Finance Ministry red flags over free ration scheme, Modi cabinet pushes ahead

The Cabinet decision to extend the free ration program was made over the objection of the Ministry of Finance. In a memo dated September 26, she informed the Ministry of Consumer Affairs, Food and Public Distribution, which had pleaded for the device to be maintained until the end of 2022, that since “the pandemic s ‘is considerably reduced and the distress for which this aid – PMGKAY – was granted does not seem to prevail”, the latter’s proposal “is not supported”.

The finance ministry also said there may not be sufficient grain stocks to continue distribution under the PMGKAY indefinitely, as global food stocks have tightened significantly following the war in Ukraine. “The continuation of this (PMGKAY) over a long period may give the impression of its permanent or indefinite continuation and make it difficult to stop it,” the ministry’s expenditure department said, while calling for the regime to end on September 30. 2022.

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Government expenditure so far for the scheme launched in April 2020 to provide free 5kg/month food grain to 800 million beneficiaries under the National Food Security Act (NFSA) has amounted to around 3.45 trillion rupees. With additional Rs 44,762 crore for running the program during October-December 2022, the total cost of the program will increase to Rs 3.91 trillion.

The Ministry of Finance in its note also observed that “there is already fiscal pressure due to the Russian-Ukrainian war, (its) effect on fuel prices, the rise of other subsidies, etc.

FE had previously indicated that the Ministry of Finance would strongly advocate for the imposition of a cap on annual spending on food subsidies, the relentless increase in which has become an unsustainable fiscal liability in recent years. This may suggest ending the unlimited nature of heavily subsidized grain supplies under the National Food Security Act 2013 and ways to reduce the rising economic costs of rice and wheat as incurred by the Food Corporation India (FCI).

Christy J. Olson