As 2022 drew to a close, the government announced that it would provide free foodgrains to eligible beneficiaries under the National Food Security Act (NFSA), 2013, for all of the New Year.

The Union Cabinet’s 24 December 2023 decision came amid a debate over freebies to voters in the country. The political calendar of 2023 is packed with elections in nine states, which will be followed by Lok Sabha elections in 2024.

The Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) — launched in April 2020 as a pandemic relief measure under which 5 kg of free foodgrains were provided to NFSA beneficiaries in addition to their monthly entitlement (35 kg to a Antyodaya household and 5kg per person in a Priority Household) of subsidised foodgrains under at Act — has been discontinued.

Food security law

The NFSA, which was enacted by the UPA-2 government and came into effect on 5 July 2013, entitles 67 per cent of households — 50 per cent urban and 75 per cent rural — in India to subsidised grains under the Targeted Public Distribution System (TPDS). About 81.35 crore people around the country are covered under the NFSA.

The subsidised prices are specified in Schedule-1 of the Act which the government can change by executive order. In fact, the government issued a notification on 30 December 2022 to provide free foodgrains under the NFSA from 1 January. The quantity of grains to which a beneficiary is entitled is also laid down, and cannot be changed without Parliament’s approval.

As of now, NFSA beneficiaries pay Rs 3, Rs 2, and Re 1 per kilogram of rice, wheat, and nutri-cereals (millets) respectively. These prices were initially fixed for three years. Thereafter, the grains were to be supplied “at such price, as may be fixed by the Central Government, from time to time, not exceeding, (i) the minimum support price for wheat and coarse grains; and (ii) the derived minimum support price for rice, as the case may be”.

While the three years ended on 5 July 2016, prices have remained constant despite the steady rise in the Economic Cost of the foodgrains, and the government’s growing food subsidy bill.

Rising financial burden

The Economic Cost has four main components — Pooled Cost of Grain, Procurement Incidentals, Acquisition Cost, and Distribution Cost — which have increased over the years. The Economic Cost of rice has risen from Rs 2,615.51 per quintal in 2013-14 to Rs 3,104.96 in 2016-17 to 3,670.04 in the current financial year. The Economic Cost of wheat has risen from Rs 1,908.32 per quintal in 2013-14 to Rs 2,196.98 in 2016-17 to Rs 2,588.70 in 2022-23.

The government’s food subsidy bill too has increased apace. It peaked at Rs 5, 41,330.14 crore in 2020-21 before falling to Rs 2, 86,469.11 crore in 2021-22. For 2022-23, the government has budgeted a subsidy bill of Rs 2, 06,831.09 crore, but this may rise further. The government has said that the cost of distributing free foodgrains under the NFSA would be around Rs 2 lakh crore.

PM-GKAY and NFSA

On 28 September last year, ahead of Assembly elections in Gujarat and Himachal Pradesh, the government had announced the seventh phase of PM-GKAY, extending the Covid-19 relief measure until the end of December. According to official data, the government had spent about Rs 3.45 lakh crore up to the sixth phase of PM-GKAY, and expected the total cost at the end of the seventh phase to reach Rs 3.91 lakh crore.

The total foodgrains allocation under the scheme stood at 1,121 lakh metric tonnes (LMT). The discontinuation of PM-GKAY after 31 December 2022 is significant in view of the depletion of the country’s foodgrain stocks in recent months. As of 30 November last year, the combined stock of rice (115.42 LMT) and wheat (190.27 LMT) was 305.69 LMT, which was lower than the 591.56 LMT (213.03 LMT rice and 378.53 LMT wheat) of stock on the same day in 2021. While the rice stock position is comfortable, wheat stocks are just above the buffer stock requirement. The government’s expenditure on the PM-GKAY was about Rs 15,000 crore per month.

How much is enough?

Announcing the Cabinet decision on 24 December 2022, Food Minister Piyush Goyal said, “Adhik quantity ki awashyakta nahin hai. (Additional quantity is not required.)” This was different from the thinking in the government when the PM-GKAY was launched.

During the time of PM-GKAY, a person from a Priority Household (PHH) received 10 kg of foodgrains (5 kg each under NFSA and PM-GKAY) per month. This was a little less than the average monthly cereal consumption of 11.23 kg in rural areas and a little more than the 9.32 kg consumed in urban areas during 2011-12, the latest available figures under the NSSO’s household consumption survey.

As per the latest allocation order for December 2022, 13.67 LMT of wheat and 31.72 LMT of rice is required for distribution per month under NFSA. The monthly requirement for PM-GKAY was about 40 LMT. (7 LMT wheat and 33 LMT rice)

Free grains economics

The 24 December 2022 decision will put an additional financial burden of Rs 13,900 crore on the exchequer, and the total food security bill for the 2023 calendar year will be around Rs 2 lakh crore.

However, it will bring some savings to NFSA beneficiaries. For Antyodaya Anna Yojana (AAY) families, who are entitled to 35 kg of foodgrains per month, the government has allocated 99.75 LMT (71.07 LMT rice and 28.68 LMT wheat) for the financial year 2022-23.

This means AAY families will save about a total of Rs 2,705 crore for the entire year. However, if AAY families need to buy extra quantities of foodgrains (equal to what they were receiving under the PM-GKAY) from the open market, they will have to pay more.

Similarly, for PHHs, the government has allocated 423.86 LMT foodgrains (272.8 LMT rice, 144.76 LMT wheat, and 6.3 LMT nutri-cereals), enabling them to together save about Rs 11,142 crore in the year. Like the AAY families, the PHHs will also be required to shell out more to buy additional food grains at the market rate.

Issues with PMGKAY

1. Election angle– The latest scheme seemspolitically motivated to appeal to voters in nine States that go to polls in 2023.

• The Indian political landscape is impacted by ethnic heterogeneity and increasing electoral competition. In this scenario, all political parties prefer to differentiate themselves based on such patronage politics.
• More than 20 central government programmes have been named or renamed to credit the ‘Pradhan Mantri’.

2. Exclusion related issues– The PMGKAY lacks universal coverage. The ration records have not been updated since the 2011 Census. At least 100 million beneficiaries, especially children born in the last decade, are missing from ration.

• As per estimates, more than 40% of India’s population is currently excluded from both the NFSA and PMGKAY.
• The most marginalised castes and communities, especially migrants, sex workers, the homeless and transgender persons are often without NFSA ration cards.

3. Undermining MGNREGA–The scheme is being systematically undermined by acute Budget cuts, delayed payments and technological hurdles. In the period 2022-23, only 57 million households received NREGA work unlike 73 million last year.