On Prime Minister’s Claims about the COVID-19 Relief Package

Date: 
July 01, 2020
Author: 
Vikas Rawal and Jesim Pais

Prime Minister Modi was on the TV screens once again yesterday which marked the last day of the third month after his sudden announcement of lockdown at the end of March. This lockdown has plunged the entire economy into a crisis and has left people scrambling for whatever means of survival they could find. Unemployment has increased to unprecedented levels and, as a result of widespread loss of incomes, a vast proportion of the population has been subjected to food insecurity.

In his speech yesterday, PM Modi made several claims about the relief programmes of the government over the last three months. There is no denying that whatever assistance reached the people during these trying times would have brought some relief. However, true to his image, the Prime Minister vastly overstated what the government has done to bring relief to the people and the scale of assistance provided during the last three months.

We would like to discuss the reality of three main claims made by the Prime Minister.

Claim 1: The PM claimed that Rs. 31,000 had been transferred to 20 crore beneficiaries of Jan Dhan Yojana (JDY).

The cash assistance provided through this component of the Pradhan Mantri Garib Kalyan Yojana was meager and covered only a small section of the informal workers who lost their livelihoods because of the lockdown. Under this component of the relief package, the Government provided a cash assistance of just Rs.500 per month and that too only to women beneficiaries of the Pradhan Mantri Jan Dhan Yojana. Women constitute only about half (21 crore out of 39 crore) of the beneficiaries of this scheme. There have been widespread demands of increasing this amount and covering a much larger population of informal workers who lost their livelihoods during the lockdown. Not only has this demand not been addressed, even the assistance of Rs.500 per month has not been extended beyond June 2020. In other words, poor women who were being provided Rs. 500 per month during the last three months are not going to be provided this assistance any further.

Claim 2: PM Modi claimed that Rs. 18000 crores have been transferred to 9 crore farmers.

Three points need to be made regarding this claim.

First, this assistance refers to the first instalment of Rs. 2000 per farmer household under the PM-Kisan scheme which came into effect in December 2018.  The expenditure under the PM-Kisan was already committed in the budget and was due to be paid, and does not constitute additional relief provided to deal with losses caused by the lockdown.

Secondly, the government had originally declared that they would cover 14 crore farmers under the PM-KISAN scheme.  This coverage has been reduced to just 9 crore farmers. In other words, even by the government's own estimate, 36 per cent of eligible farmers have not been provided even this assistance. In addition, PM-KISAN excludes a vast population of poor farmers whose land records are not updated and tenant farmers who do not have land registered in their own names.

Thirdly, nothing was mentioned about the second instalment of PM-KISAN. The government should immediately provide the next instalment of PM-KISAN as farmers are having to spend on buying inputs for the kharif crops with the onset of the monsoon.

Claim 3: Over 81 crore persons were provided 5 kg grain and 1 kg daal free of cost for the last three months through the PM Garib Kalyan Ann Yojana (PMGKAY).

This was the most important component of the relief package and distribution of additional grain through PMGKAY would have provided some relief against food insecurity. A number of State governments as well as political parties including the CPI(M) had demanded an extension of the scheme. Finally, yesterday the Prime Minister announced that this scheme will be extended until November. The extension of this scheme until November would certainly bring some further relief to households that are covered under the National Food Security Act.

Having said that, it must also be mentioned that the experience over the last three months shows that there are large gaps between the claims and reality of implementation of PMGKAY. The amount of grain actually distributed through the scheme is far short of what was promised by the government.

As per the National Food Security Act (NFSA), the government is supposed to provide subsidised grain to 3/4th of the rural population and half of the urban population. Government uses population estimates for 2011 to estimate its commitment in this respect. Accordingly, about 2.39 crore households (covering 9.93 crore persons) have Antyodaya Anna Yojana Cards and 71.1crore persons are covered under Priority Household (PH) cards. While AAY households get 35 kg of grain per month, the entitlement of PH households is 5 kg per person per month. This amounts to a total of 43 lakh tonnes of grain entitlement under the National Food Security Act per month.

On March 26th, the Finance Minister announced that the entitlement of all 81 crore persons covered under NFSA will be doubled for the period of three months by providing the same entitlement as NFSA through PMGKAY, and that this extra grain will be provided free of cost.

First of all, it must be noted that over the last six years that the NFSA has been operational, the government has not accounted for the increase in population in estimating the coverage of the Act. As per the population projections of the Census of India, 75 per cent of rural population and 50 per cent of urban population in 2020 amounts to 89.52 crore persons. In other words, the government is providing subsidised grain to 8.1 crore persons less than what is mandated under the NFSA. If the government was fulfilling its statutory obligations under NFSA, it should have been allocating 48 lakh tonnes of grain every month rather than 43 lakh tonnes that it currently does.

Secondly, over the last three months, the government has distributed 45.6 lakh tonnes less grain than it had promised. Data presented in Table 1 clearly show that, instead of distributing 43 lakh tonnes every month under each scheme, the distribution of grain has been significantly lower. In April, only 26 lakh tonnes of grain was distributed under PMGKAY. In May and June, the shortfall was very significant in both NFSA and PMGKAY. The total allocation under the two schemes was only 70 lakh tonnes in April, 77 lakh tonnes in May and 66 lakh tonnes in June.

Table 1. Distribution of grain under the National Food Security Act (NFSA) and the Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY), April-June, 2020

Note: Data for June as available on July 1, 2020. In 28 States, the distribution takes place through Point-of-sale machines, and the real time data are recorded. It is possible that for a few States the data for June were incomplete until the time these figures were taken.
Source: https://annavitran.nic.in

Data also show considerable variation in the distribution of grain under PMGKAY across States. While some States managed to distribute most of what was allocated to them, a large shortfall is seen in some cases. No distribution of foodgrain under PMGKAY has been undertaken in Delhi (though some distribution of grain took place from Delhi’s own foodgrain stocks). Almost no distribution under PMGKAY was done in Punjab either. In the case of Himachal Pradesh, very little distribution took place in April, there was no distribution in May, and it was only in June that one finds a significant quantity of grain to have been distributed. Only 59 per cent of grain allocated to West Bengal under PMGKAY was distributed. Similarly, the distribution under PMGKAY was only 53 per cent of allocation in Uttarakhand and 60 per cent of allocation in Madhya Pradesh.

This large shortfall in distribution of grain was clearly a result of lack of preparedness and planning before the scheme was launched. States had not been informed in advance about this provision resulting in inability of the States to offtake and distribute this grain.

Table 2. Allocation, offtake and distribution of grain under Pradhan Mantri Garib Kalyan Ann Yojana (thousand tonnes)

Note: Data for June as available on July 1, 2020

Finally, the government has claimed that it spent Rs. 60,000 crores for distribution of this grain over the last three months. This is a misleading claim for two reasons. First, this is only a notional figure. The grain distributed through PMGKAY had already been procured by the government and was lying unused for over one year in different FCI warehouses. A lot of this grain was of poor quality and at the risk of rotting if it was not distributed immediately. The Food Corporation of India has been unable to sell this grain in the open market even at a subsidised price. Given this, no additional allocation of resources were required for obtaining the grain. In fact, the government has saved further expenditure it would have had to incur on storage and preservation of this grain by distributing it. Secondly, the value of the grain that has been distributed is considerably lower than what the government is claiming to have spent on PMGKAY. When the government accounts for expenditure on subsidised distribution of grain, it estimates the value of grain at economic cost (Rs. 2684 per quintal for wheat and Rs. 3727 per quintal for rice). At this cost, the total value of grain that was distributed under PMGKAY over the last three months was only about Rs. 32194 crores.

We have not estimated the value of pulses provided under PMGKAY because of lack of availability of data. Until early June, NAFED had dispatched about 5.3 lakh tonnes of pulses to different states for distribution under PMGKAY. However, at least some of these were not distributed because of poor quality and operational difficulties. No data are available as of now on how much of the pulses have actually been distributed by the States. But since the total quality is relatively small, it is not expected to make much difference to the gap between the expenditure that the government claims to have made on PMGKAY and the actual value of the grain that has been distributed.

Table 3. Total value of grain allocated and distributed at economic cost (Rs crore)

The central government has made it a practice to hold announcements of major policy decisions until the last minute. Instead of being transparent and consultative, the government keeps everyone guessing about what would happen at the end of each phase of the lockdown (and opening up).  In line with this practice, the PM waited until the last day of the three month period for which the first set of relief measures of the government were announced to disclose what the government was planning to do in the coming months. While several State governments and political parties had been demanding extension of the relief programmes, the government kept everyone guessing about what it would finally decide to do. This style of functioning seriously compromises operational preparedness not just of the different arms of the central government but also of the State governments, and affects the effectiveness of relief measures.

In his speech yesterday, the PM announced that only one component of the original package -- distribution of free grain through PMGKAY -- is being extended until November. This is sorely inadequate. Government needs to expand the coverage of the public distribution of food and make it universal at least until this crisis lasts. This would ensure that the grain reaches even those who are not covered under the NFSA but have been exposed to food insecurity during the present crisis. Secondly, the government needs to complement payment of cash wages in NREGA with provision of additional grain. This would help in strengthening demand, ensure that people have adequate foodgrain supply, and reduce the massive burden of excess foodstocks on the government. Thirdly, provision of cash transfer needs to be continued, its coverage expanded to all informal workers and unemployed adults, and the amount of monthly transfer increased significantly from the meagre amounts that have been provided thus far.