Context:
In light of the recent report by Niti Aayog indicating that 250 million individuals have emerged from poverty during the last nine-and-a-half years of the current government’s tenure, the Prime Minister has faced criticism from opposition parties for his decision to extend the distribution of free ration through the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme for an additional five years. This announcement was made by Modi during a campaign rally in Chhattisgarh late last year.
Relevance:
GS3-
- Inclusive Growth and issues arising from it
- Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices
- Public Distribution System – Objectives, Functioning, Limitations, Revamping
Mains Question:
In the backdrop of 250 million persons coming out of poverty during the last nine-and-a-half years of incumbent government, the government’s decision to continue with supply of free ration under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme for five years deserves a rethinking. Discuss. (15 Marks, 250 Words).
Background:
- To begin with, let’s examine some details. Before April 2020, the central government provided subsidized food, primarily wheat, rice, and coarse cereals, at prices of Rs 2/3/1 per kg to approximately 820 million beneficiaries covered by the National Food Security Act (NFSA).
- There were two categories of beneficiaries.
- Under the Antyodaya Anna Yojana (AAY), the poorest households received 35 kg of food grains per household each month, or 7 kg per person per month for households with 5 members.
- With 24 million AAY households, this amounted to 120 million people (24×5). The remaining 700 million people received five kg per month.
- Additionally, from April 2020 to December 2022, all 820 million beneficiaries received an extra 5 kg per month for free under the PMGKAY to alleviate the challenges posed by the COVID-19 pandemic.
- Starting January 2023, while the extra 5 kg under the PMGKAY has been discontinued, all 820 million individuals are receiving their entitled quota (120 million AAY beneficiaries: 7 kg per month; 700 million non-AAY beneficiaries: 5 kg per beneficiary per month) under NFSA for free. This will continue until 2028.
- Among the 820 million beneficiaries are 250 million who have risen out of poverty. The Prime Minister is reluctant to exclude them, citing the possibility of unforeseen circumstances pushing them back into poverty and the need for ongoing support.
- Examining the factors behind the upliftment of 250 million individuals from poverty, Niti Aayog suggests that the provision of subsidized or free food under the National Food Security Act (NFSA) played a crucial role.
- Essentially, the improvement in their economic condition is closely tied to the continuation of this food support. It appears that Prime Minister Modi was hinting at this connection during his remarks in Parliament, suggesting that the withdrawal of free food could lead these individuals back into poverty.
- Alternatively, there might be a situation where a certain number, denoted as ‘X,’ has genuinely escaped poverty. Their income may now be sufficient to afford food at prevailing market prices, eliminating the need for free supplies under the NFSA.
- In such cases, the government should not maintain them on the list of beneficiaries based solely on the assumption that unforeseen circumstances might arise.
- There exists a substantial number of undeserving beneficiaries within the NFSA. The Shanta Kumar Committee recognized this issue in 2015, recommending that the eligible population for subsidized food under NFSA should not exceed 40 percent, as opposed to the current coverage of 59 percent.
- This surplus of 19 percent equates to approximately 270 million individuals. However, the government has not taken any measures to exclude them.
Sides of the Argument:
- Critics question the rationale behind providing free food to individuals who have surpassed the poverty line, a stance that Modi strongly opposes.
- During the debate on the Motion of Thanks to the President’s address in the recently concluded budget session of Parliament, the Prime Minister argued that one cannot disregard the possibility of these individuals slipping back into poverty.
- Denying them access to food, even if provided freely, in such circumstances could have severe consequences for their ability to make ends meet.
- Therefore, he emphasized the urgent need to retain them in the list of beneficiaries. However, this argument is not without its flaws.
- Critics argue that this could lead to a perpetual extension of benefits, as the government may never reach a point where it considers otherwise.
Other Concerns Associated:
- Conducting a rough estimate, providing free food to a million individuals increases the annual food subsidy by Rs 200 crore.
- Expanding the beneficiaries list by 100 million would result in an additional subsidy burden of Rs 20,000 crore per year.
- A logical step would be to exclude undeserving beneficiaries to make room for those in need, thereby keeping the subsidy under control. However, considering Prime Minister Modi’s stance, this seems highly improbable.
- The question also lingers regarding what the beneficiaries should contribute. The National Food Security Act (NFSA) enacted in 2013 mandated beneficiaries to pay Rs 2/3/1 per kg for wheat/rice/coarse cereals, freezing these rates for three years.
- Since 2016, there has been no legal barrier to increasing the price. Yet, not only has the price not been raised, but the government, under Modi’s leadership, has reduced it to zero.
- The question arises whether the substantial number of individuals (820 million) receiving these benefits are genuinely so impoverished that they cannot contribute even a fraction of the cost (for instance, in the case of wheat at Rs 2 per kg, it was 1/15th).
- Concerns persist regarding the administration of the food subsidy scheme. Currently, the Union government instructs agencies like the Food Corporation of India (FCI) to procure food at Minimum Support Price (MSP) and distribute it free to beneficiaries through a network of fair price shops (FPSs) across the country.
- With over 60 million tons of food grains available in the supply chain at zero cost (prior to January 2023, the price was absurdly low at Rs 2/3/1 per kg), there is a risk of unscrupulous operators diverting and selling in the open market.
- The ongoing investigation into the Public Distribution System (PDS) scam in West Bengal, involving the diversion and smuggling of subsidized or free food grains meant for NFSA beneficiaries worth tens of thousands of crores, serves as a stark example.
- This mechanism also allows the government to use state agencies for price support to farmers under an ‘open-ended’ procurement system, purchasing unlimited quantities at MSP.
- This results in excessive stocks, high carrying costs, rising food subsidy bills, and challenges in defending subsidies at the World Trade Organization (WTO).
Conclusion:
To address these issues, the central government should undertake a comprehensive overhaul of its food subsidy program under NFSA. This includes excluding better-off individuals from the beneficiaries list and updating it regularly to reflect changes in income status. To tackle misuse, storage problems, high costs, and more, the existing system of purchase, handling, and distribution by state agencies should be disbanded. Instead, the subsidy should be transferred directly to the beneficiary’s account using the Direct Benefit Transfer (DBT) mechanism.
