India will end its Covid-19 era free food programme on December 31 and replace it with a cheaper programme that will save the government nearly US$20 billion in the next 12 months.

Late on Friday, India's Food and Trade Minister Piyush Goyal said the government will stop the free food programme after 28 months as 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.

The programme provided poor families with 5kg of foodgrains each month in addition to other highly subsidised foodgrains. It started in April 2020 and has cost the government nearly US$47 billion.

The government was also spending US$24.16 billion under the National Food Security Act to provide highly subsidised foodgrains to nearly 75 percent of its rural and 50 percent of its urban population.

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

The Indian government was struggling to manage its wheat stockpile due to additional distribution of wheat and the prices in the local market jumped to arecord high.

“The discontinuing scheme means the government can now sell 2 to 3 million tonnes in the open market to calm prices,” said a New-Delhi based dealer with a global trade house. (Reuters)