Under NFSA, each beneficiary is entitled to receive 5 kg of wheat at Rs 2/kg or rice at Rs 3/kg every month.

The Cabinet on Wednesday is likely to decide whether to distribute foodgrains for free to ration card holders under the National Food Security Act (NFSA) beyond June as most of the states including Karnataka, Madhya Pradesh, Bihar, Maharashtra and Rajasthan have sought the continuation of the scheme for another three months starting July.

A ministerial panel under road transport and highways minister Nitin Gadkari was scheduled to consider the extension issue on Tuesday, but the meeting was cancelled. Congress president Sonia Gandhi has also urged prime minister Narendra Modi to continue the scheme for another three months.

Under the Pradhan Mantri Garib Kalyan Yojana (PMGKY), announced by finance minister Nirmala Sitharaman in last week of March after country-wide lockdown was imposed, all 81 crore beneficiaries under the NFSA are entitled to receive same additional quantity of wheat or rice as under the law, free of cost during April-June. The Centre has allocated about 12 million tonne (MT) of food grains under this scheme, out of which 11.4 MT has been lifted by states until June 22 while remaining quantity will also be distributed by the Centre to states by June 30.

The Centre is estimated to have spent Rs 46,000 crore for the free food grains for three months and an extension until September would take the total expenditure to about Rs 92,000 crore. “Actually the cost to the Centre is not much considering it bears a huge subsidy in distributing wheat and rice through the public distribution system,” said an official. There was a compulsion to clear stocks from the Central Pool, which had record 96 MT of wheat and rice on June 1, and the government took the opportunity to clear some of the stocks after the pandemic, the official said.

Under NFSA, each beneficiary is entitled to receive 5 kg of wheat at Rs 2/kg or rice at Rs 3/kg every month.

“The Centre can tap more than Rs 100,000 crore, provided it takes bold steps. It is the mountains of grain that the Food Corporation of India (FCI) has accumulated,” noted economist Ashok Gulati wrote in FE on June 22. He suggested the government to unlock this unproductive capital (excess stocks in the central pool of FCI) by liquidating those grains in open market operations at whatever reasonable market price it can get.

“It will not recover its full economic cost, as they are much higher than the prevailing market prices. But, by not liquidating it, the FCI will keep incurring unnecessary interest costs of about Rs 8,000-10,000 crore per annum,” Gulati said.