Food, fertiliser subsidy estimated lower in FY25

The fertiliser subsidy for FY25 has been set at ~1.64 trillion, 12.77% less than the Revised Estimates (RE) of FY24

The Interim Budget pegged a lower food, fertiliser, and fuel subsidy for financial year 2024-25 (FY25) in comparison to the Revised Estimates of FY24, but hefty allocation for fuel subsidy stood out.

The hike in fuel subsidy is mainly on account of the additional ~100 per cylinder subsidy announced in October 2023 for the 103 million Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries as part of the pro-women outreach of the Modi government.

Till then, the PMUY beneficiaries who formed almost 33 per cent of the 314 million LPG connections in India got a subsidy of ~200 per cylinder.

Since October 2023, the average cost of 12 cylinders for a PMUY beneficiary in Delhi is ~600 per cylinder against ~900 market price.

Also, in October, the Cabinet expanded the PMUY coverage by 7.5 million new LPG connections over three years to 2025-26, at a cost of ~1,650 crore.

The government had rolled out PMUY in May 2022 to make clean cooking fuel, such as LPG, available to the rural and deprived households, which were otherwise using traditional cooking fuels, such as firewood, coal, cow-dung cakes, etc.

It initially covered 90 million beneficiaries for up to 12 refills for 2022-23.

On other subsidies, the fertilizer subsidy for FY25 has been pegged at ~1.64 trillion, 12.77 per cent less than the Revised Estimates (RE) of FY24.

It reflects the government’s optimism that urea, DAP, and other fertilizer prices will remain lower than their current levels in FY25.

“In FY24, the RE pegs fertilizer subsidy at ~1.89 trillion, which is slightly higher than the BE of ~1.75 trillion as the government allocated ~13,000 crore through the supplementary route. However, my estimate is that actual expenditure will be somewhere around ~2 trillion in FY24,” said S Nand, an expert on the fertilizer sector.

On food subsidy, the Union government has fixed a subsidy of ~2.05 trillion in FY25 Interim Budget, which was slightly lower than the RE of FY24.

The subsidy was on account of the first year of the free food grains scheme (Pradhan Mantri Gareeb Kalyan Ann Yojana) that has now been extended for next five years.

The food subsidy is slightly lower than FY24 as expenditure on the free food grains scheme. Fuel subsidy has been pegged at ~11,925 crore. This is almost the same as the RE of FY24 but higher than the BE of FY24 due to extension of the Ujjwala scheme for women.