FinMin opposed extension of PMGKAY a day ahead of Cabinet approval

Office memorandum flagged fiscal concerns due to impact of Ukraine war on fuel prices. With Covid-19 having largely subsided, reasons for which earlier extensions were given no more seem to hold

A day before the Cabinet approved the extension of Pradhan Mantri Gareeb Kalyan Anna Yojana, an office memorandum (OM) from the Finance Ministry’s Department of Expenditure, started doing the rounds of social media. In it was laid out the department’s objections to the extension.

The OM is confirmed to be authentic. Signed by Rabi Ranjan, a deputy director in the department, it said the financial implication of Rs 44,762 crore was a substantial one.

“Moreover, the financial implication mentioned in the letter is based on the economic cost of food grains. However, even if the open market sale price of food grains is considered, there is a large fiscal impact of the order of 50 percent of that amount, which is an actual cash cost” it said.

The note flagged existing fiscal concerns due to the war in Europe, its impact on fuel prices and the consequent rise in other subsidies. It said that since the Covid-19 pandemic had subsided considerably, the reasons for which the earlier extensions were given do not seem to hold anymore.

“Continuation of this over a long period of time may give an impression of its permanent or indefinite continuation and make it difficult to stop. Hence terminating the scheme on September 30, 2022 is advisable. As such the proposal is not supported,” the OM said.

It added that there could be a shortage of food grains to continue such a scheme indefinitely as the global food stock situation has considerably tightened since Russia’s invasion of Ukraine. “In case, despite the view above, it is still proposed with a continuation of the scheme, a reduction in quantity may at least be carried out,” it said.