Prime Minister Narendra Modi has announced the extension of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), a scheme providing free ration, for five more years. The scheme, which was set to expire later this year, will continue benefiting 800 million people amidst rising food costs. While this move will incur an additional annual cost of ₹15,000 crore for the government, totaling up to ₹1 lakh crore over five years, it ensures continued support for those in need.
Under the revamped PMGKAY introduced in December 2022, the government stopped the additional supply of 5 kilograms of free food grains through the public distribution system (PDS). Instead, the normal entitlement of 35 kg of food grains for Antyodaya Ann Yojana families and 5 kg for Priority Households, sold at highly subsidized rates of ₹2/kg for wheat and ₹3/kg for rice, was made free of cost. This revised PMGKAY will run until December 31, 2023, and the additional cost has been factored into the FY24 food subsidy budget of ₹1.97 lakh crore.
The estimated annual tab of ₹15,000 crore accounts for the government forgoing revenue earned through charges of ₹1, ₹2, and ₹3 for every kilo of coarse grains, wheat, and rice sold via the PDS. Consequently, the government will lack flexibility to raise PDS rates for the next five years, as the extension nullifies the option to increase prices under the National Food Security Act. Despite these considerations, India’s food subsidy is expected to remain high, though significantly lower than the levels observed during the Covid-19 years.
In FY21, the government allocated a substantial ₹5.41 lakh crore towards food subsidy, which has gradually decreased to ₹1.97 lakh crore in the current fiscal year based on budget figures.