Free grains scheme: Rs 40,000 crore net increase in Budget estimate needed

Under the scheme, all the beneficiaries under the National Food Security Act (NFSA) are entitled to receive same amount of rice and wheat — 5 kg per person per month — extra, free of cost.

The Centre will require to spend Rs 40,000 crore more over the relevant budget outlay to distribute free food grains to 80 crore people under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) during May to November of this fiscal.

While the total cost of the programme is estimated at about Rs 1 lakh crore, some Rs 60,000 crore savings from the Budget estimate (BE) of food subsidy in the year from clearance of a part of arrears meant to be cleared in the current fiscal, in March 2021 itself, would reduce the net extra outgo to nearly Rs 40,000 crore, an official source said.

In the FY22 Budget, the government had factored in clearance of some food subsidy arrears in FY22, but the actual food subsidy spend in FY21 was Rs 5.25 lakh crore, Rs 1 lakh crore more than the revised estimate (RE); the FY21 spend included some part of arrears which were earlier planned to be cleared in FY22. In FY21, too, Rs 1.3 lakh crore was spent on PMGKAY. The food subsidy allocation for FY22 (BE) is Rs 2.43 lakh crore.

In June, the Centre extended the validity of a programme to distribute free grains to 80 crore people until November from May-June. Under the scheme, all the beneficiaries under the National Food Security Act (NFSA) are entitled to receive same amount of rice and wheat — 5 kg per person per month — extra, free of cost.

The additional spending will be offset entirely by the extra amount of Rs 50,000 crore received from RBI as surplus transfer. The fiscal cost of the recently announced stimulus measures amounted to about Rs 1.5 lakh crore, of which about Rs 1 lakh crore or two-third was on account of PMGKAY.