India’s stocks of rice to fall below the buffer level if free ration continues through FY23

Rice stocks in the central pool will plunge below the buffer for the first time in at least two decades by the end of this financial year, if the free ration scheme – Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) – is extended for the seventh time to the October-March FY23 period.

The stocks will reduce to 12-13 million tonnes (MT) by April 1, 2023 below the buffer of 13.58 MT for that time. If PMGKAY extended by another six months (from October), there would be no rice stocks left to be sold through open market sale scheme or to meet the grain requirement under the ethanol blending programme and other exigencies.   Extension of the scheme will also reduce wheat stocks in the central pool as on April 1, 2023 to 9-9.3 MT against the buffer of 7.4 MT.

The sixth phase of PMGKAY implementation ends on September 30. Sources said that the Cabinet will decide on whether to extend the scheme any further soon.

In addition to the requirement of additional foodgrain, running the scheme for October-March FY23 with the current grain composition will cost the exchequer a massive Rs 90,000 crore, if not higher. This will be reflected in the food subsidy expenses, the ministry had said in an internal note. 
The government expenditure on the PMGKAY is likely to cross Rs 3.16 lakh crore since its roll-out in April, 2020.   Earlier, the expenditure department of the finance ministry, too, had expressed concern over the high budgetary cost of the free ration scheme and argued against extending it beyond September.

When the free ration scheme was extended for the April-September period of the current financial year, the government estimated its cost at Rs 80,000 crore. But, due to lower wheat stocks, rice component of the scheme was enhanced by 80%, effective May. This led to an additional cost of over Rs 5,000 crore given that ‘economic cost’ is higher than that of wheat.

Since the open-ended procurement of grains started in 2013-14 under the National Food Security Act (NFSA), food stocks haven’t fallen below the buffer levels. The actual rice stocks haven’t plunged below the buffer requirement at least since 2000 while depletion of wheat stocks led to imports in 2006.

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