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Centre may extend food scheme for poor, expand fuel subsidy
The cabinet, chaired by Prime Minister Narendra Modi, on December 23, 2022 decided to provide free food grains to about 81.35 crore.
The government may continue providing free food grains to over 813 million underprivileged Indians even after the December 31, 2023 deadline for the popular scheme, and could extend the annual fuel subsidy up to ₹2,400 per beneficiary to about 96 million households beyond the current financial year because of both economic and political reasons ahead of the 2024 general elections, two people aware of the development said on Monday.
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The cabinet, chaired by Prime Minister Narendra Modi, on December 23, 2022 decided to provide free food grains to about 81.35 crore (813.50 million) beneficiaries under the National Food Security Act (NFSA) “for one year” from January 1, 2023.
“The government is closely monitoring the food inflation situation and, if required, the benefit could be extended beyond the one-year period, with or without any modification in the scheme,” one of the people cited above said.
The people said the government is also committed to shielding the underprivileged from rising prices of cooking gas (domestic LPG). The government has been providing a targeted subsidy of ₹200 per 14.2kg cylinder to Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries for up to 12 refills a year for 2022-23 and 2023-24. This deadline could also be extended if cooking gas prices continue to remain high, they said.
According to the latest data from the Indian Oil Corporation (IOC), the current price of a 14.2kg cooking gas cylinder is ₹1,103 in Delhi, the third-highest in about 10 years after touching a record high of ₹1,241 on January 1, 2014 . Currently, the government provides ₹200 per cylinder subsidy to about 9.6 crore (96 million) PMUY beneficiaries out of the total 313.6 million consumers as of March 2023. Technically, a PMUY beneficiary can claim subsidy on 12 cylinders in a year amounting to ₹2,400 in a financial year. However, according to official data, the per capita consumption of 14.2kg cylinders by PMUY beneficiaries was 3.01 in 2019-20, which rose to 3.71 in 2022-23.
Shielding the underprivileged from inflationary pressures is the prime focus of the government, the two persons mentioned above said.
State-run oil marketing companies (OMCs) did not raise volatile LPG prices in proportion to international rates that led to companies suffering revenue losses of about ₹28,000 crore and the government compensated them with a one-time compensation of ₹22,000 crore in 2022-23.
“During the period from June 2020 to June 2022, the international prices of LPG increased by around 300%. However, to insulate consumers from fluctuations in international prices, the cost increase was not fully passed on to consumers of domestic LPG. Accordingly, domestic LPG prices have been raised by only 72% during this period. This has led to significant losses for these OMCs,” a statement issued by the cabinet secretariat on October 12, 2022 said. India imports 60% of the domestic LPG (cooking gas) it consumes.
Similarly, the government provided 5kg per person per month free food grains to the underprivileged immediately after the outbreak of the Covid-19 pandemic, which continued for over 28 months under the Prime Minister Garib Kalyan Ann Yojana (PMGKAY) worth over ₹3.90 lakh crore. While the temporary scheme, PMGKAY, ended on December 31 after several extensions, the cabinet on December 23, 2022, decided to provide free food grains to 813.5 million beneficiaries under the NFSA for one year from January 1, 2023, effectively merging PMGKAY into an existing scheme.
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The government’s thinking may also have been driven by a seasonal spike in inflation, driven by the prices of vegetables, pulses, even cereals. Retail inflation in July touched a 15-month high of 7.44%. Hence, the priority is to ensure adequate supply of grains and continue providing subsidised food and fuel to the underprivileged and fertilisers to the farmers, the people said.
RBI’s Monetary Policy Committee (MPC) on August 10 kept the policy rate unchanged at 6.5% on inflation concerns. It projected retail inflation at 5.4% for 2023-24, which is higher than its earlier projection of 5.1%.
