The food and supplies department of the government of the National Capital Territory of Delhi has shared some startling data on the use of free foodgrain by its residents. The reported data, resulting from a survey that began some time back, shows that almost nine per cent of Delhi’s total beneficiaries of free foodgrain under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) are ineligible. Of the 0.65 million ineligible beneficiaries, as many as 96,000 are car-owners, over 89,000 beneficiaries enjoy similar benefits from other states as well, and about 0.28 million either own land, pay income tax or function as directors of registered companies.
The proportion of ineligible beneficiaries under PMGKAY is slightly lower at the national level. India has at present 192 million ration cards issued to households, resulting in a total beneficiary count of 760 million. As recently reported in The Indian Express, about six per cent of these ration card holders have been found to be ineligible. This is a somewhat better outcome than in the country’s capital, but it certainly is no cause for any celebration either. As many as 9.47 million ration card holders in the country pay income tax, another 1.75 million own four-wheelers, and another 0.53 million are directors on the boards of companies.
The rules of eligibility under PMGKAY prohibit release of free foodgrain to government employees, households with an annual income of Rs 1 lakh or more, owners of four-wheelers and income-tax payers. The foodgrain supplies (35 kg of foodgrain per month to each family covered under the Antyodaya Anna Yojana or AAY and five kg of foodgrain per month for each member of a Priority Household or PHH) became free during the Covid pandemic, but by the end of 2023, the Narendra Modi government decided to extend the scheme for five more years till December 2028. The total financial burden of the free foodgrain supplies for these five years was estimated at Rs 11.8 trillion, or an average annual outgo of Rs 2.36 trillion.
The Union department of food and public distribution is now engaged with various state governments, requesting them to verify the data on ineligible claimants of free foodgrain under PMGKAY and weed them out by the end of next month. Going by the obvious political risks and consequences of removing ineligible beneficiaries of the free foodgrain scheme, it is unlikely that this exercise will be completed by the end of September 2025.
The history of India’s economic reforms shows quite clearly that few governments have shown any appetite for spending its political capital to strictly enforce a welfare scheme’s rules to limit its scope to benefit only those who are its target group. In any case, the original idea of extending the free foodgrain scheme to about 800 million Indians from January 2024 for five years was deeply flawed in a country where even the government’s own multi-dimensional poverty estimate placed poor people at just 210 million. Now that the scheme has already become operational, any attempt at pruning the list of beneficiaries will be a herculean task.
Note that the difficult task of weeding out the ineligible beneficiaries has been entrusted to the states. States may well complain that at the time of announcing the scheme and its extension for five years, the Centre was at the forefront, taking credit for the decision. But now the states will have to incur the wrath of sections of people to be declared ineligible from October 2025 for unjustifiably claiming free foodgrain. Or if the states wish to continue to provide free foodgrain, they have to bear the cost. This could also be why state governments would be reluctant to implement the scheme to weed out the ineligible households, leading to delays.
There could be yet another problem. A large number of income-tax payers have gone out of the tax net with effect from April 2025, since earners of income of up to Rs 12 lakh are no longer required to pay any taxes under the rebate scheme announced in the last Union Budget. Most likely, a large chunk of 9.4 million ration-card holders, who paid income tax till last year, may not be paying any tax from this year and may well become eligible for the free foodgrain scheme once again.
Yet another reason for the slow implementation of the weeding out process would be the relatively small reduction in the amount of money spent on food subsidies. An annual savings of about Rs 14,000 crore would not make a big difference to the overall food subsidies bill of Rs 2.36 trillion. In the trade-off between a political pushback from those who would be deprived of free foodgrain and the small financial gain for the government, there would be a natural preference for no action on pruning the beneficiaries list.
So, what should the government do? Instead of going in for small gains by removing ineligible beneficiaries, it should recognise that the country has emerged from the Covid crisis that led to the decision to provide free foodgrain to over 800 million Indians. In any case, the achievement of having reduced multi-dimensional poverty in the country to just about 210 million Indians should be used to limit the free foodgrain scheme only to such people.
Mind you, there will be no discontinuation of PMGKAY. Only its scope would be restricted to the bottom 25 per cent of people covered at present. Of the current 759 million beneficiaries under PMGKAY, 81 million belong to the AAY category, or the poorest of the poor. Why not restrict PMGKAY only to AAY beneficiaries? But if the government is apprehensive of a political backlash because of discontinuing the free foodgrain scheme much before the end of its extended term, an alternative path would be to revamp PMGKAY to provide a much lower amount of foodgrain to each eligible household.
Already, with respect to the entitlement amount, the government makes a distinction between those coming under the AAY scheme and those under the PHH scheme. A revamped PMGKAY could reduce the entitlements further or simply substitute the food allocation with a cash transfer equivalent to the cost of procuring the foodgrain, even while continuing the scheme till December 2028.
Among the many reforms that the government has promised to introduce in the coming days, a revamp of PMGKAY would be in order. This would make the free foodgrain scheme more pragmatic and appropriate, reflecting the reduced level of poverty. This would also help the government save its resources now being spent on food subsidies and divert them to projects that would help it realise the goals of strengthening the country’s social and economic infrastructure.
AK Bhattacharya is the Editorial Director, Business Standard. He tweets @AshokAkaybee. Views are personal.