India will end its COVID-19 era free food program on December 31 and replace it with a cheaper scheme that will save the government nearly $20 billion over the coming 12 months.

Late on Friday, India's Food and Trade Minister, Piyush Goyal, said the government would stop the free food program after 28 months because the economic situation had improved since COVID-19 cases and restrictions have eased.

The pandemic and its impact on the economy — particularly on food prices — have squeezed India's hundreds of millions of poor people.

Its initial program provided poor families with 5 kilograms of food grains each month, in addition to other highly subsidised food grains.

That started in April 2020 and has cost the government nearly $US47 billion ($A69 billion).

The government was also spending 2 trillion rupees ($35.9 billion) under the National Food Security Act to provide highly subsidised 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 subsidised food grain free for the coming 12 months, Mr Goyal said.

This will see 35kg of food grain every month given to families at the cost of 1 to 3 Indian rupees.

Millions of poor households will benefit, while some priority groups will get 5kg food grains per person for the same price.

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

India's government has been struggling to manage its wheat stockpile due to additional distribution of wheat and the prices in the local market jumping to a record high.

"The discontinuing scheme means the government can now sell 2 to 3 million tonnes [of wheat] in the open market to calm prices," said a New-Delhi based dealer from a global trade house.

Reuters