Record fertiliser, food subsidy likely in FY23
NEW DELHI: 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 may offset this. In November, then revenue secretary Tarun Bajaj said 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.
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.
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.