India’s fertiliser subsidy bill for the current fiscal year (FY23) could rise further to around Rs 2.5 trillion as prices of chemical nutrients and natural gas are expected to remain elevated, a top government official told Business Standard.
“Fertiliser subsidy bill could go up to Rs 2.5 trillion. We are monitoring prices and will ensure there is no burden on the farmers. And maintaining the fiscal deficit target for the year will be difficult, especially after the recent excise duty cuts,” the official said, speaking on condition of anonymity.
The FY23 fertiliser subsidy budget estimate is Rs 1.05 trillion. This was set before Russia’s invasion of Ukraine led to a spike in global commodity prices and disruption in supply chains.
Finance Minister Sitharaman had said on May 21 that fertiliser subsidy would require an additional outlay of Rs 1.10 trillion over and above the budgeted amount, taking the outlay to Rs 2.15 trillion. If the burden does hit Rs 2.5 trillion, that would mean extra spending of around Rs 35,000 crore.
With just the first two months of FY23 gone, it is becoming increasingly clear that unless there is a massive boost in tax revenue or major cuts in expenditure, the fiscal deficit target of 6.4 per cent of GDP is unlikely to be met.
The impact of the latest round of excise duty cuts on petrol and diesel will be around Rs 85,000 crore for the year, which the Centre will bear as the cut is on Road and Infrastructure Cess, which is not shareable with states.
Additionally, the decision to provide a subsidy of Rs 200 per gas cylinder (up to 12 cylinders) to over 90 million beneficiaries of Pradhan Mantri Ujjwala Yojana, will lead to revenue foregone of Rs 6,100 crore a year for the exchequer.
Apart from the already announced Rs 1.10 trillion increase in fertiliser, the government’s decision to extend the PM Garib Kalyan Anna Yojana (PMGKAY) till September will increase the food subsidy outlay for FY23 to Rs 2.87 trillion from the Budget Estimate of Rs 2.07 trillion.
Provided all other assumptions remain the same, all these hits on revenue and expenditure may widen the fiscal deficit budget estimate for the year to Rs 19.42 trillion from a budgeted Rs 16.6 trillion. As a percentage of nominal gross domestic product, this would be 7.5 per cent of the GDP compared with the budgeted 6.4 per cent.
 "India's FY23 fertiliser subsidy may rise further to Rs 2.5 trillion")
