India replaces COVID-era free food program with cheaper option

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Published: January 16, 2023

Reuters – India ended its COVID-19 era free food program on Dec. 31 and will replace it with a cheaper program expected to save the government nearly US$20 billion in the next 12 months.

India Food and Trade Minister Piyush Goyal said the government will stop the free food program after 28 months because the economic situation has improved since COVID-19 cases and restrictions have eased.

The pandemic and its impact on the economy, particularly on high food prices, have squeezed India’s hundreds of millions of poor people over the past few years.

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The program provided poor families with five kilograms of food grains each month in addition to other highly subsidized food grains. It started in April 2020 and has cost the government nearly $47 billion.

The government was also spending $24.16 billion under the National Food Security Act to provide highly subsidized food grains to nearly 75 per cent of its rural and 50 per cent of its urban population.

Now the government will make the highly subsidized food grains free for the next 12 months, Goyal said. This gives 35 kg of food grain every month to families at the cost of one to three cents. Millions of poor households benefit while some priority groups get five kg of food grains per person for the same price.

The government will save at least $20 billion over the next 12 months by ending the pandemic-era free food program, as it will only spend on one food scheme instead of multiple programs, according to an official who did not want to be named.

The Indian government was struggling to manage wheat stockpiles due to additional distribution of wheat and the prices in the local market jumped to a record high.

“The discontinuing scheme means the government can now sell two to three million tonnes in the open market to calm prices,” said a New-Delhi based dealer with a global trade house.

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