The Union government’s total expenditure on explicit subsidies – food, fertiliser and LPG – is projected to drop 21% to Rs 4.13 trillion in the current fiscal year, from Rs 5.24 trillion in FY23. However, for 2024-25, the interim budget has made provision of Rs 3.81 trillion as subsidies, 8% lower than the revised estimate for FY24.
This is due to the softening of global prices of soil nutrients and the termination of the extra grains supplies under the Nationa Food Securities Act (NFSA) effective December 2022. As per the revised estimate of the total spending on the three subsidies in the current fiscal is Rs 4.13 trillion, with Rs 2.12 trillion for food, and Rs 1.88 trillion for fertilisers.
The government had spent Rs 2.72 trillion on account of food subsidy in FY23 because of additional foodgrains provided under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in addition to highly subsidised food grains supplied under NFSA during first three quarters of last fiscal.
Under PMGKAY which was subsumed with NFSA from January 2023 around 48 million tonne (MT) of foodgrains are supplied free to 800 million beneficiaries annually. The government has extended the free ration scheme for five years till end of 2028 which would cost the exchequer around Rs 11.8 trillion due to a projected increase of 7%-8% in the minimum support price (MSP) of the rice and wheat annually, and other costs.
Finance minister Nirmala Sitharaman in her interim-budget (2024-25) speech said the worries about food have been eliminated through free ration (PMGKAY) for 800 million people.
“Minimum support prices for the produce of ‘Annadata’ are periodically increased appropriately and the provision of basic necessities have enhanced real income in the rural areas,” she said.
The fertiliser subsidy as per revised estimate for FY24 has been projected at Rs 1.88 trillion, a decline of 25% from a record of Rs 2.51 trillion in FY23. For the next fiscal, the subsidies towards soil nutrient is estimated at Rs 1.64 trillion.
Meanwhile, with the expansion of 7.5 million additional LPG connections to be released the Pradhan Mantri Ujjwala Yojana in 3 years under the scheme, the total subsidy outgo for LPG this fiscal as per revised estimate is Rs 12,240 crore. For next fiscal, the budget has made provision of Rs 11,925 crore under LPG subsidy.