Fertiliser, food subsidy set to touch record level
The country has penciled in a higher outgo as rising international gas prices and a free food scheme bloated federal subsidies, which comprise a tenth of the total government expenditure.
The Centre’s subsidies on fertilisers and food are set to touch a record level of nearly ₹5.6 lakh crore in the fiscal year ending March 2023, overshooting the earlier estimate by a third, people aware of the matter said on Friday, adding that an expected uptick in government revenues is likely to ensure the situation remains well within the fiscal comfort zone.
The country has penciled in a higher outgo as rising international gas prices and a free food scheme bloated federal subsidies, which comprise a tenth of the total government expenditure. This will be the third straight year the government is likely to overshoot its overall subsidy target.
Higher than expected tax revenue is expected to offset this. In November, then revenue secretary Tarun Bajaj said that tax collection in 2022-23 could exceed the budget estimate by almost ₹4 lakh crore.
The fertiliser subsidy bill is expected to be over ₹2.5 lakh crore, way higher than the budget estimate of ₹1.05 lakh crore. India imports a range of crop nutrients and offers them at a discounted rate to millions of farmers.
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A key reason for the record fertiliser subsidy this year is higher prices of liquefied natural gases, a critical input for the manufacturing of nutrients such as urea. Farmers pay ₹242 for a 45kg bag of urea while the cost of production stands at ₹2,650 a bag. The government pays the balance as subsidy to fertiliser firms.
On November 2, the Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi approved an additional ₹51,875 crore subsidy for phosphatic and potassic (P&K) fertilisers for the rabi or winter-sown season, amid high global prices.
The move will cushion prices of crop nutrients that are governed by the Centre’s nutrient-based subsidy (NBS) scheme. Farmers grow a variety of winter-sown crops, which account for nearly half of India’s annual food output, including wheat, lentils, legumes, millets, vegetables and oilseeds, such as mustard.
Under the NBS policy, the government offers, on an annual basis, a fixed rate of subsidy on a per kg basis for crop nutrients containing nitrogen (N), phosphate (P), potash (K) and sulphur (S).
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The latest tranche for the winter-sown season, which runs from October to March, will add to the government’s record estimated full-year (2022-23) fertiliser subsidy bill of ₹2.5 lakh crore. It is also substantially higher than the previous season’s ₹28,655 crore subsidy for P&K fertilisers, mainly on account of rising global prices.
India’s annual consumption of fertilisers in 2021-22 stood at 32.54 million tonnes, against 29.37 million in the previous fiscal, recording a growth of 10.8%, according to the Fertiliser Association of India.
The government’s food subsidy bill is likely to cross ₹3 lakh crore, mainly on account of the Pradhan Mantri Garib Kalyan Anna Yojana, a free foodgrain scheme launched after the onset of the Covid-19 pandemic.
The total cost of the scheme since its launch till December 2022 will be ₹3.91 lakh crore, according to a Cabinet note. The cost for the October-December 2022 period works out to ₹44,762 crore, an official said.
