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Fact sheet: Central govt’s Rs 190 crore a month subsidy on food grains vs Delhi govt’s Rs 8 crore a month free ration scheme in the national capital

Besides providing subsidised food grains under the NFSA Act, 2013, the central government has also announced free ration under the PMGKAY III entailing an additional subsidy of over Rs. 203 crores for two months

Two weeks after the Central Government announced that it will provide 5 kg of food grains free-of-cost to around 80 crores Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) beneficiaries during May and June 2021 amidst the second wave of COVID-19 cases, the Delhi chief minister Arvind Kejriwal yesterday announced that his government will provide two months of free ration to 72 lakh cardholders in the national capital.

The announcement made by the Delhi Government naturally piqued the interest of the observers, given that the centre had already announced free ration for the 80 crore beneficiaries, including those residing in Delhi.

With the Delhi government known for notoriously stealing credit and spending inordinate amounts on advertising and promoting itself, it is relevant to get into the details of food subsidies granted by the centre vis-a-vis Arvind Kejriwal-led government.

The central government provides food grains to the states, including Delhi, through the central pool stocks for distribution under the Targeted Public Distribution System or the National Food Security Act, 2013. In addition to this, the centre had also instituted a social welfare scheme called Pradhan Mantri Garib Kalyan Anna Yojana in March 2020 to provide free ration to people amid the coronavirus pandemic.

Under the National Food Security Act, a quantity of roughly 4.50 lakh metric tonnes of food grains are allocated to Delhi per year, entailing a food subsidy of Rs 1163 crores/annum by the central government.

NFSA Allocation and Subsidy details for Delhi

The economic cost of Wheat and Rice are Rs 25.73/kg and Rs 36.79/kg respectively. However, the subsidised cost, also known as Central Issue Price (CIP), meaning the prices at which the central government provides food grains to the beneficiary states are Rs 2/kg and Rs 3/kg for wheat and rice respectively. In a nutshell, the central government provides subsidies of Rs 23.73/kg on wheat and Rs 33.79/kg on wheat under the NFSA allocation.

About 29,830.39 MTs of Wheat and 7,742.35 MTs of Rice are allocated monthly to Delhi by the Centre for distribution. This means, the total monthly subsidy under NFSA, therefore, amounts to Rs 70.79 crores for wheat and Rs 26.16 crores for rice. As a result, the central government provides spends Rs 96.95 crores (combined wheat and rice) per month as subsidies for beneficiaries in Delhi.

The below table provides the details on how the central government subsidies food distribution in Delhi:-

Economic Cost Rs. / Kg25.7336.79 62.52
Central Issue Price (CIP)Rs. /Kg23 —
Monthly Allocation In MTs29,830.397,742.3537,572.74
Subsidy under NFSA per monthIn Rs. Crore70.7926.1696.95
Annual Subsidy under NFSA In Rs. Crore849.50313.931,163.43
CIP recovered per month In Rs. Crore5.972.328.29
 CIP recovered annually In Rs. Crore71.5927.8799.47
Subsidies granted by the central government under NFSA

Since the monthly subsidy under the NFSA stands at Rs 96.95 crores, the yearly is equal to Rs 1,163.43 crores.

Now, since the central government subsidies food grains and charges a paltry Rs 2 per kg for wheat and Rs 3 per kg for rice, it recovers about Rs 5.97 crores from the distribution of 29,830.39 MTs of wheat monthly and Rs 2.32 crores from the distribution of 7,742.35 MTs of rice. Collectively, the recovered amount is Rs 8.29 crores monthly, and for two months it would be double, i.e Rs 16.58 crore. It is this amount that Kejriwal plans to waive off with his announcement of providing free ration to Delhi residents for the next two months.

As the government recovers Rs 2 per kg on wheat and Rs 3 per kg on rice, the monthly subsidy granted by the central government would be equivalent to the subsidy granted under NFSA per month, which is Rs 96.95 crores, minus the CIP recovered per month, which stands at Rs 8.29 crores. Therefore, the monthly subsidy by the central government sums up to Rs 88.62 crores (Rs 96.95 crores-Rs 8.29 crores).

In effect, the central government provides a subsidy of Rs 88.62 crores to the residents of Delhi under the NFSA. On the other hand, the Arvind Kejriwal government after announcing free ration to 72 lakh card holders will be providing the subsidy of Rs 8.29 crores per month or Rs 16.58 crores for two months.

Hence from the above calculation, it could be inferred that the Central Govt.’s assistance to beneficiaries in terms of food grains (which is totally provided) and subsidy are far in excess of what the Delhi Government claims to project through this announcement.

Additional subsidy provided by the Centre under the PMGKAY III

Furthermore, under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY III), free ration for 2 months (May-June 2021) has been allocated by the Government of India from the Central Pool.

Under the PMGKAY III a quantity of nearly 72778 MT of food grains have been allocated to Delhi for the 2 months of May-June 2021, entailing an additional subsidy of over Rs. 203 Crore by the Government of India.

Through PMGKAY III, the central government will be providing 58,222 MTs of wheat costing around Rs 25.73 per kg and 14,556 MTs of rice costing around Rs 36.79 per kg free of cost to the beneficiaries residing in Delhi.

Economic Cost Rs. / Kg25.7336.79 —-
Total Allocation under PMGKAY (for May & June 2021)In MTs58,22214,55672,778
Total Subsidy (2 months)In Rs. Crore149.8153.55203.36
Monthly SubsidyIn Rs. Crore74.9126.78101.68
Subsidy under the PMGKAY in Delhi for May-June 2021

For wheat, the total subsidy will amount to Rs 149.81 crores and for rice it would be Rs 53.55 crores for the two months—May and June 2021. Therefore, the monthly break down of subsidy comes at Rs 101.68 crores, including Rs 74.91 crores of wheat subsidy and Rs 26.78 crores of rice subsidy.

In all, the central government is providing a monthly subsidy of Rs 190.3 crores (Rs 88.62 crores under NFSA + Rs 101.68 crores under PMGKAY III), whereas the Arvind Kejriwal government will be providing a subsidy of Rs 8.29 crores per month.

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OpIndia Staff
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