No decision has been made regarding extending PMGKAY after December; this fiscal year, food subsidies would surpass Rs 3 trillion. The government had paid off FCI's loans in FY21 and included all food subsidy spending in the Budget, ending the practice of paying a portion of the subsidy outside of the budget.
The current fiscal year's food subsidy expenditures for the government are projected to exceed Rs 3.1 trillion, an increase of 50% from the initial allocation.
Due to low-capacity utilization and a generally unreliable economic environment, the majority of the enterprises chose a "wait and watch" strategy during the first half (H1) of this fiscal year.
According to officials from the food ministry, an additional cost of Rs. 1.24 trillion above the budget estimate is anticipated for the current fiscal year as a result of the free ration program, Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), being extended for a seventh time through the end of December.
“Lower procurement of wheat in the current marketing season (2022-23) would result in savings in the range of Rs 15,000 – Rs 20,000 crore this fiscal. The pre-budget consultations with the finance ministry and states were still going on,” an official told the media.
The administration has not yet decided whether to continue the free ration program past December 2022. In order to lessen the miseries of people during the COVID pandemic, PMGKAY was started in April 2020 to deliver free 5 kg of foodgrains per person every month to more than 8000 million individuals covered by the National Food Security Act (NFSA).
Officials from the food ministry claim that the government has already spent more than Rs 3 trillion on the free ration program, which was introduced in 2020 during the first wave of the epidemic.
For rice and wheat, the estimated economic cost of food grain procurement by the FCI in 2022–2023 is Rs 3,670.04 and Rs 2,588.70 per quintal, respectively. This cost includes costs such as payments made to farmers under the Minimum Support Price (MSP), as well as procurement, acquisition, and distribution costs. In accordance with the NFSA, the government distributes rice and wheat to beneficiaries for Rs 3 and Rs 2 per kg, or what is known as the central issue price.
Price policy for rabi crops (2023–2024) is the report's title, and it was published by the Commission for Agricultural Costs and Prices (CACP). According to the statement, "The food subsidy has increased significantly between 2013–14 and 2020–21 due to rising economic cost and central issue price of grains."
The unsustainable nature of the costs associated with food subsidies has also drawn criticism from the finance ministry. However, according to a recent food ministry statement, the Prime Minister's Office (PMO) approved the decision to prolong the current CIP under the NFSA until further orders. The majority of the government's budget for food subsidies goes through FCI, with the remainder going to state governments that use a decentralized procurement system.
Ashok Gulati, agricultural economist and former chairman of CACP told the media that "Current food subsidy expenses are financially unviable, which may reach Rs 3 trillion this year, and it needs quick rectification." He recommended setting the issue price in PDS at 50% of MSP.
As a result of decreased production and increased worldwide demand, FCI's purchases from farmers declined by more than 56.6% in the 2022–23 season, from 43.3 mt to barely 18.8 mt.
Each year, the FCI purchases and distributes more than 70–80 mt of rice and wheat. The corporation oversees the purchase, storage, and delivery of wheat and rice to states for distribution, primarily for the NFSA and other welfare programs.
