After grappling with a problem of plenty on foodgrains for many years, the government now appears to be confronted with the opposite -- there's a possibility that stocks at the Food Corporation of India’s (FCI) central pool will fall short of comfortable levels in the coming year. As of this month, the central pool held a total of 545 lakh tonnes of foodgrains, comprising of 279 lakh tonnes of rice and 266 lakh tonnes of wheat. This is a good 36 per cent below the 855-lakh-tonne stock at the same time last year and also short of the four-year average of 740 lakh tonnes. The main reason for the lower stock is the inability of government agencies to meet their wheat procurement targets in the ongoing rabi marketing season. Against a target to mop up 444 lakh tonnes of wheat in April-June 2022, agencies managed to procure just 187 lakh tonnes until August, as spiralling open market prices made it unattractive for farmers to sell to state agencies. With a patchy monsoon resulting in a 13 per cent drop in the kharif paddy acreage and market prices already firming up, there’s a risk of a similar script playing out with rice procurement as well.
As things stand, against the current stock of 545 lakh tonnes in the central pool (without accounting for further rice procurement), the government will need about 41 lakh tonnes a month to meet its Public Distribution System (PDS) obligations for the remaining seven months of this fiscal, which adds up to 287 lakh tonnes for the year. Should the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) be extended, this will add an additional obligation of 287 lakh tonnes. Worries that the food stockpile will fall short of the buffer stock norms if PMGKAY is continued, therefore, appear to be quite valid. Pragmatism would seem to dictate that the PMGKAY be discontinued, once the current extension runs out in September this year, to solve this problem. For one, this scheme, which distributes 5 kg of free foodgrains to 81.3 crore PDS beneficiaries in addition to the 5 kg sold at subsidised prices of ₹2-3 per kg, has already been extended on six occasions since it was introduced in March 2020 as a safety net for the poor during Covid. Given that the economic cost of procurement and storage are borne entirely by the Centre, PMGKAY also entails an additional fiscal outlay of about ₹1.6 lakh crore a year.
But given the prevailing high levels of inflation, a complete stoppage of the scheme may be seen as an unkind move at this juncture. Apart from humanitarian considerations, a sudden stoppage of PMGKAY supplies would throw the scheme’s 81.3 crore beneficiaries at the mercy of the markets for procuring cereals. This could in itself stoke price rise. Instead, the Centre can consider withdrawing free distribution of grains under PMGKAY and substitute it with an additional foodgrain quota of 5 kg over and above regular PDS supplies, at subsidised prices for PDS households. This will not only reduce the fiscal burden to an extent but also discourage the leakages and wastage that are an inevitable offshoot of any State-sponsored, free giveaway. Eventually, the government should consider phasing out PMGKAY gradually by the end of this financial year. The current foodgrain stocking norms, set more than five years ago, also need to be reviewed to build up higher strategic reserves towards exigencies.