The extension of the free food grains scheme for five more years will cost the exchequer Rs 15,000 crore more annually, officials said.
The Centre will have to forego Rs 1-3 per kg in earning by distributing coarse grains, rice and wheat for free which would lead to a loss of Rs 15,000 crore every year. Sources said the government has lost the flexibility to raise the PDS rates.
Prime Minister Narendra Modi had told a poll rally in Chhattisgarh the free foodgrain scheme under the Pradhan Mantri Garib Kalyan Ann Yojana would continue.
The officials said the move would not affect fiscal deficit, but economists said this would mount pressure on the planned deficit for the fiscal, especially as the expenditure on the rural job and housing schemes is expected to rise.
The subsidy cost could be Rs 2 lakh crore in the current fiscal to Rs 2.55 lakh crore by fiscal 2029, based on beneficiary data, according to Devendra Pant, chief economist at India Ratings and Research.
“Assuming a 5 per cent increase in economic cost annually and that the growth of nominal GDP is faster than the economic cost at 8 per cent, the cost of the food subsidy could increase from Rs 2 lakh crore to Rs 2.6 lakh crore eventually, bringing the total cost to Rs 11.5 lakh crore over the five years,” Pant said.
