Renewal of Centre's free foodgrain scheme PMGKAY up in air, likely to be 'political call': Report

A decision to extend the free foodgrain for poor scheme PMGKAY is likely to be a “political call” as the latest phase is set to end on September 30 with the possibility of another renewal up in the air.

“There are still things to come. There has been extra outflow, about Rs 1 lakh crore in fertilisers, Rs 80,000 crore in already decided foodgrain (subsidy until September). There will be some outflow on the petroleum side also, prices have gone up and spending has gone up for cooking gas through subsidies, it will be significant,” an official told The Indian Express.

“If the free foodgrain scheme gets extended, the cost for the second half would be little less than Rs 85,000 crore. Close to that, but a bit lower,” the official added.

Finance Secretary T V Somanathan on Wednesday said the government is yet to take a decision on extending PMGKAY under which 5 kilograms of foodgrains is provided free of cost to the poor. The scheme was launched in March 2020 with an aim to mitigate hardships being faced by poor people in the wake of the coronavirus pandemic.

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Since then, the scheme has been extended several times, and the last extension is for six months and that ends on September 30.

"Decision is yet to be taken," Somanathan said in response to a question regarding extension of the PMGKAY.

The discussion on renewing the scheme comes at a time when political parties are engaged in a heated debate over freebies, with Finance Minister Nirmala Sitharaman telling that political parties that come to power on pre-poll promises of freebies should pay for those through budgetary provisions instead of shifting the burden elsewhere.

In the last two years, around Rs 2.6 lakh crore has been spent under the scheme and it will cost another Rs 80,000 crore with the extension of six months.

In June, the Expenditure Department said that PMGKAY should not be extended beyond September as it could strain government finances. The department also said the high food security cover has already "created a serious fiscal situation" and is not needed in non-pandemic times.

"It is vital that major subsidy increase/tax reductions are not done. In particular, it is not advisable to continue the PMGKAY beyond its present extension, both on grounds of food security and on fiscal grounds. As it is each family is getting 50 kg of grains, 25 kg at a nominal price of Rs.2/Rs.3, and 25 kg free. This is far beyond the need at a non-pandemic time," the Department said.

The government is also staring at a surge in its fertiliser subsidy bill, which is expected to be between Rs 2.15-2.5 lakh crore, depending on volume of utilisation, the report said.

Though government officials have pointed out that there is unlikely to be any adjustment to the borrowing figure for the second half of the fiscal, a close eye is being kept on the surging subsidy bill even as tax revenue growth is providing a cushion, the report added.