Grain of truth – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/opinion/pradhan-mantri-garib-kalyan-yojana-should-be-seen-as-a-safety-net-not-the-norm-for-all-times/article65267531.ece

Free rations must not become ingrained to the government’s food procurement policy

Free rations must not become ingrained to the government’s food procurement policy | Photo Credit: SRINIVASAN KV

Pradhan Mantri Garib Kalyan Yojana should be seen as a safety net, not the norm for all times

The extension of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) by another six months till September this year, is a well thought out move under the circumstances, as the need for a safety net cannot be brushed aside. The PMGKY entitles 80 crore beneficiaries under the National Food Security Act to an additional five kilograms of foodgrain, apart from an equal entitlement under the NFSA, 2013. The PMGKY extension will entail an outgo of ₹80,000 crore in FY23. However, the spurt in commodity inflation in the wake of the Ukraine war can hurt growth (now pegged at 7.8 per cent for FY23 by the Reserve Bank of India), and with it incomes and purchasing power. Free rations can shore up purchasing power for spending on pulses and vegetables, besides health, education and basic consumer items. To be sure, the recent move also seems aimed at reducing bulging food stocks, now at 87 million tonnes (including unmilled rice of 44 million tonnes) to the July buffer norm of 41 million tonnes. With a distribution of about eight million tonnes per month under PMGKY and NFHS (80 crore beneficiaries getting 10 kg of grain per capita per month), the stocks could come down closer to the stipulated levels. The question, of course, is whether this should become ‘ingrained’ as part of India’s food procurement and distribution policies. The ruling party as well as the others in the fray — such as Aam Aadmi Party which too has announced free rations for Delhi-ites — have also realised that free rations can play a decisive role in elections.

The PMGKY should be re-examined as the economic scenario normalises. Besides the fiscal stress, the scheme can undercut some of the basic ideas underpinning the recently repealed farm laws, if its scale and scope were to go out of hand. It is worth considering whether the distribution of nearly 100 million tonnes of foodgrain (almost a third of total annual grain output) through the PDS makes sense. It could lead to heightened procurement pressure, higher MSPs and further cultivation of wheat and rice at the expense of other crops, leading to soil exhaustion and water depletion. As the recently released Supreme Court appointed panel on farm laws observes: “The economic cost of FCI for acquiring, storing and distributing foodgrains is about 40 per cent more than the procurement price — an addition of ₹1,200 per quintal for rice and ₹800 per quintal for wheat.” While it might make sense to revise the buffer norms upward to deal with adversities such as crop damage, or unforeseen economic shocks, it is hard to justify a peak stock level of above 50-60 million tonnes. Hence, a crop procurement system that acts as a price stabiliser, supplemented by a robust agri-marketing infrastructure as envisaged by the repealed farm laws, is the way forward.

India’s food management should be nuanced and nimble, combining private and government efforts. For now, India should take a considered view on its wheat and rice export targets for FY23 in view of the prevailing uncertainties.

Published on March 28, 2022

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