PDS costs seen to rise sharply next fiscal
By Sandip Das
With the surplus grains held by the government and periodic rise in the minimum support prices and rising transportation fares, the economic cost of handling rice and wheat for the Food Corporation of India (FCI) is projected to increase to Rs 4173/quintal (rice) and Rs 2980/quintal (wheat) in the next fiscal an increase of by 17% and 21% compared to FY22.
This implies relentless rise in food subsidy, given that issue prices of the grains under the National Food Security Act (NFSA) remain unchanged.
Sources told FE that the corporation incurs the economic cost of rice and wheat, including minimum support price (MSP), storage, transportation and other costs has been rising steadily since FY22 as the government has continue buy foodgrains from the farmers in the opened ended manner far exceeding the requirement under the free ration scheme or Pradhan Mantri Garib Kalyan Anna Yojana (PMFBY) and for keeping a buffer.
The rise in economic cost in FY26 compared to current fiscal for rice and wheat is projected at 3.2% and 4.5% respectively.
Officials said that for the last few years the agencies are buying over 76 million tonne (MT) of rice and wheat annually while the requirement under the PMFBY is around 56 to 58 MT. “Higher procurement of grains against the requirements are adding up to economic costs despite the government the liquidation some stocks through open market sale,” an official said.
Higher economic costs are also likely to push up the government’s food subsidy expenditure. As per the budget estimate, the government has projected food subsidy expenses of Rs 2.03 trillion for FY26, an increase of 3% over the revised estimated of current fiscal.
However officials said that food subsidy expenditure is expected to rise in next fiscal if the government does not liquidate huge surplus foodgrains especially rice.
The FCI currently holds 50.85 million tonne (MT) — 37.9 MT of rice and 12.12 MT of wheat. This stock excludes 30 MT of rice receivable from millers. The stock is against the buffer of 21.41 MT for April 1.
In the current fiscal, FCI has liquidated 3 MT (wheat) and 1.7 MT (rice) in the open market from the bulk buyers while an additional 2.3 MT has been allocated for ethanol.
The government has extended the free ration scheme for five years till end of 2028 which would cost the exchequer around Rs 11.8 trillion due to a projected increase of 7%-8% in the MSP of the relevant crops – rice and wheat and coarse grains– , and other costs such as transportation, storage and incidentals.
Under the PMGKAY, 5 kg of rice or wheat are provided free of cost monthly to each of the 801 million beneficiaries. Before January 2023, marginal prices were paid by the beneficiaries, and the shift to a regime of completely free supply of grains raised the cost by 3-4%.
This article has been republished from The Financial Express.