PMGKAY: ‘Free Ration Scheme’ may be closed soon, Finance Ministry recommends to Central Government

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free ration

Highlights

  • Under the ‘Free Ration Scheme’, 80 crore people are being given free ration across the country.
  • Food subsidy bill expected to increase to about Rs 3.7 lakh crore
  • In March this year, the government extended the free ration scheme for 6 months till September 2022.

PMGKAY: The free ration (‘Free Ration Scheme’) being given to poor families since the time of Corona epidemic can be stopped after the month of September. In fact, the Department of Expenditure of the Ministry of Finance has suggested to the Central Government not to extend the ‘Free Ration Scheme’ beyond September. Also appealed to the government not to give any tax relief. The Finance Ministry believes that if the government does not do this, then it will increase the fiscal deficit. This will not be good for the financial health of the country. According to the Department of Expenditure of the Ministry of Finance, there has been a revenue loss of about Rs 1 lakh crore due to reduction of duty on petrol and diesel last month. Providing further relief will increase the financial burden.

Heavy spending on food subsidy

Since the Corona epidemic, the government has to spend a huge amount on the food subsidy bill. This is because free ration is being provided to about 80 crore people of the country. However, this scheme has also worked to provide great relief to lakhs of people. In view of this, the central government in March this year extended the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) till September 2022. Significantly, the government had allocated Rs 2.07 lakh crore for food subsidy in the budget. However, the food subsidy bill is expected to rise to Rs 2.87 lakh crore by taking forward the free ration scheme. If this scheme is extended for another six months, then the food subsidy bill can increase by Rs 80,000 crore to about Rs 3.7 lakh crore. This would not be good for the financial health of the government.

Fiscal deficit estimated to reach record high

The fiscal deficit may hit a record high of 10.2 per cent of GDP in the fiscal year 2022-23 due to the country’s fiscal policy aligning with monetary policy amid rising inflation and rising subsidies. According to the report of UBS Securities, the government has been suggested to take policy steps to reduce the fiscal deficit. According to the report, in the current financial year, the deficit of the Center can be 6.7 percent and that of the states is 3.5 percent.

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