The government may have to hike food subsidy allocation by Rs 25,000 crore in the next fiscal year from the budget estimate of Rs 2.27 lakh crore, if the Food Corporation of India (FCI) continues to hold surplus grains stock far exceeding the buffer, officials said.
The FCI’s economic cost (including MSP, storage and carrying cost) for rice and wheat for 2026-27 is estimated to increase to Rs 4391/quintal and Rs 3145/kg, respectively, up from Rs 4211/quintal and Rs 2968/quintal in 2025-26.
The government hiked food subsidy allocation by Rs 25,000 crore to Rs 2.28 lakh crore from the budget estimate (BE) of Rs 2.03 lakh crore for FY26 which has ensured that the FCI will not be taking additional loans to finance the carrying cost of hugely surplus foodgrains it holds, a food ministry official told FE.
FCI’s projected FY26 expenditure
The FCI, which accounts for over 70% of the government’s food subsidy outgo, has revised its projected FY26 expenditure to Rs 1.69 lakh crore, up from the budgeted Rs 1.43 lakh crore (95% of total subsidy estimate of Rs 1.61 lakh crore).
The finance ministry has released Rs 1.09 lakh crore crore to FCI, covering about 64% of the corporation’s estimated expenditure till the end of January, 2026.
In addition, FCI has received a temporary ‘ways and means’ advance of Rs 50,000 crore, out of which Rs 18,687 crore has been paid back and rest will be adjusted against food subsidy allocations.
The rest of the food subsidy is routed through those states who have opted for a decentralized procurement system.
The current effective central pool rice stock is over 33 MT, over 3 times the buffer of 7.61 MT for January 1. Officials said the current stock with FCI excludes about 37 MT of grain yet to be received from millers.
Central-pool rice stocks
The government’s central-pool rice stocks continue to surge despite record offloading of grain through open market sale, liberal allocations to states, and for ethanol manufacturing and Bharat rice initiative in the current fiscal. Open mark sales in FY26 have surpassed a record 7.7 million tonne (MT), higher than the FY25 sale of 4.63 MT.
The food subsidy is primarily employed to run the supply of free food grains to 810 million people under the National Food Security Act.
For the last many years, annually the FCI supplies around 36-38 MT of rice and 18-20 MT of wheat under the free ration scheme or Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) to around 810 million people. The procurement under the minimum support price (MSP) from the farmers has been in the range of 75 to 80 MT in the last many years leading to piling up of stocks.
The food ministry has stated that a periodic annual increase in MSP of rice and wheat in the range of 3% to 7% and open-ended procurement of rice and wheat provided to farmers have led to surplus grain stocks.
Under PMGKAY, 810 million people are currently being provided 5 kg each of specified grains per month free of cost. The free ration scheme is being extended till the end of 2028 and it would cost the exchequer Rs 11.8 trillion.