After being operational for 28 months between April 2020 and 31 December 2022, the Pradhan Mantri Garib Kalyan Anna Yojana, or PMGKAY, is finally ending. Announced in April 2020 at the peak of the nationwide lockdown during Covid, the scheme provided 5kg of free food grains per person per month to the poor. The discontinuation is largely due to poor wheat procurement in rabi 2021-22 and the possibility of lower rice procurement in kharif 2022 as Uttar Pradesh, Bihar, Jharkhand, and West Bengal received deficient rainfall. The central pool of stocks is the lowest in five years. So, there was little option but to stop the scheme.
As we move closer to the 2024 Lok Sabha election, it is probable that additional allocations in some form may come back if the procurement in current Kharif and ensuing Rabi seasons are in accordance with the trend observed from 2019 to 2021.
Lockdown to UP election
PMGKAY was launched when economic activity in India had largely come to a sudden halt, most businesses were closed, and according to the estimate of Jawaharlal Nehru University professor Ravi Srivastava, some six crore migrants moved to their homes in rural areas. The official estimate is six times lower. It is estimated that 12.2 crore people lost their jobs during the lockdown. At that time, PMGKAY was rightly seen as a boon to a large section of the vulnerable population, which was lucky enough to have a ration card.
Phase 1 and 2 ran for 8 months from April to November 2020. Even though the economy was still in paralysis mode, the government halted the scheme for six months till 2021. Then, it was extended for 11 months from May 2021 to March this year for phase 3 to phase 5.
PMGKAY was seen as a highly popular move in the 2022 UP assembly election campaign, and it was credited for the electoral victory of the Yogi Adityanath government.
Immediately after swearing in, the CM announced that an additional quantity of food grains will be given to card holders in the state for three months — April to June 2022. Taking cue from UP, the Narendra Modi government, on the very next day, announced the extension of PMGKAY for six months.
We do not know whether the Centre would have continued PMGKAY beyond March 2022 if the UP government had not announced its extension after winning the assembly election.
The final extension, too, came as a surprise when the Modi government announced the scheme’s extension from October to December 2022 (phase 6). The central pool of stocks was running low, and experts were advising against any further extension. It is projected that the central pool will have 159 lakh tonnes of wheat on 1 January 2023, which is barely above the buffer norm of 138 lakh tonnes. This is notwithstanding the substantial reduction in the allocation of wheat under the Public Distribution System (PDS) and its substitution with rice. Wheat allocation under PMGKAY to UP and Bihar was 4.4 lakh tonnes and 1.7 lakh tonnes, respectively. In May 2022, the same was substituted entirely with rice.
Mindful of the low central pool of stocks, the Union government has not released wheat under the open market sale scheme (OMSS), which has been used for several years to cool down market prices. This is despite the wheat inflation rate (year-on-year) touching 20 per cent.
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When politics trumped good economics
The Modi government’s decision, announced on 23 December, to distribute free food grains to 81.35 crore people under the National Food Security Act 2013 (NFSA) is to compensate for the discontinuation of PMGKAY. The food grains under PDS will be free for a period of one year from January 2023 to December 2023.
The normal offtake of wheat and rice under NFSA during 2021-22 was around 300 lakh tonnes of wheat and 313 lakh tonnes of rice. The Centre charged Rs 2,000 per tonne for wheat and Rs 3,000 per tonne for rice from the state governments. At this level of offtake, the Union government would have received Rs 6,000 crore for wheat and Rs 9,390 crore for rice from the state governments. For providing free food grains, the government will bear an additional food subsidy of about Rs 15,390 crore. In the long run, an investment of such an amount in research on climate mitigation may have been more beneficial.
Some state governments were not charging anything from beneficiaries and took food grains from central pool stocks at Rs 2,000 per tonne for wheat and Rs 3,000 per tonne for rice. Now that they will get it for free from the Centre, they will save this amount.
Ever since the NFSA was enacted, experts have argued for the lowering of the coverage under PDS.
In its 2015 report, the Shanta Kumar Committee found that at 67 per cent, the coverage of the population was much higher than required. It recommended that it should be brought down to around 40 per cent, which would have comfortably covered some below-poverty-line families and others as well.
Before the NFSA came about, the central issue prices of rice and wheat for below-poverty-line beneficiaries were Rs 4.15 per kg and Rs 5.65 per kg, respectively. For other beneficiaries, the issue prices of wheat and rice were Rs 6.10 per kg and Rs 8.30 per kg, respectively. Proposals to increase the issue price were submitted to the Cabinet several times, but they were not approved.
These levels of issue price before the NFSA to zero rupees now is truly remarkable, especially as the economic costs of both wheat and rice have been going up.
Schedule 1 of the NFSA provided for the revision of central issue prices three years after the enactment of the Act. In the 10th year of its implementation, the issue price is going to be nil!
Does it say anything about the government’s assessment of the extent of deprivation, particularly in the post-pandemic economy? How different is it from the papers published by the International Monetary Fund and the World Bank, which estimated that extreme poverty is almost eliminated?
It should be clear that irrespective of mandate, any government in 2024 will find it difficult to restore the existing issue prices, let alone raise them to 50 per cent of the Minimum Support Price (MSP).
Under these circumstances, public investment in agriculture and research is unlikely to get a boost. As we will keep moving from one election cycle to another, politics will keep trumping good economics.
Siraj Hussain is a former Union Agriculture Secretary. Views are personal.
(Edited by Humra Laeeq)