Subsidy bill nears Rs 6 trn in FY21 on extra free foodgrain distribution

The government's subsidies on food, fertilisers, LPG and kerosene are pegged at Rs 5.96 lakh crore in the current fiscal, over 2.5-fold jump from the initial budget estimates as the Centre distributed additional foodgrains free of cost to help poor mitigate the impact of COVID-19 pandemic.

In February 2020 Budget, presented in the pre-COVID scare, the government had estimated the subsidy bill at Rs 2,27,794 crore. However, all the budget estimates, have undergone major revisions as the country imposed strict lockdown to check the spread of COVID-19.

On Monday, Finance Minister Nirmala Sitharaman presented revised numbers of major subsidies.

According to the document, the subsidies on food, fertilisers and petroleum (LPG and kerosene) are estimated to fall by 43 per cent to Rs 3.36 lakh crore in the next financial year from Rs 5.96 lakh crore in the revised estimate of the current fiscal.

Subsidies have been pegged at Rs 5,95,620.23 crore in the revised estimate (RE) for 2020-21 fiscal year as against Rs 2,27,793.89 crore in the Budget Estimate (BE) of 2020-21. The subsidies for 2021-22 are projected at Rs 3,36,439.03 crore, which is lower than RE of the current fiscal but higher than the BE of 2020-21.

According to the data, food subsidy rose sharply to Rs 4,22,618.14 crore in the RE of 2020-21 from 1,15,569.68 crore in the BE. For the next fiscal, food subsidy is estimated at Rs 2,42,836 crore.

The government's decision to provide free ration to citizens during Covid-19-related lockdown and provisioning for the pre-payment of NSSF loans with FCI of about Rs 1.5 lakh crore were the major reason for rise in food subsidy, the document said.

The Centre provided an additional quota of foodgrains at free of cost during April-November period of this fiscal year to over 80 crore beneficiaries. Free rations were also given to migrant labourers.

Fertiliser subsidy has been pegged at Rs 1,33,947.3 crore in the RE of 2020-21 from Rs 71,309 crore in the BE of the current fiscal year. For the next fiscal, a Rs 79,529.68 crore has been provided in the BE.

The subsidy for petroleum products (LPG and kerosene) is Rs 39,054.79 crore in the RE as against Rs 40,915.21 crore in the BE for the current fiscal. Only Rs 14,073.35 crore has been provided for petroleum subsidy in the 2021-22 financial year.

Food subsidy is provided to meet the difference between economic cost of food grains procured by the government and their sales realization at the PDS rate called central issue price (CIP) under the National Food Security Act (NFSA) and other welfare schemes.

Similarly, the Centre provides fertiliser subsidy to manufacturers.

The government fixes theP of urea being sold in the market. The difference between the selling price and production cost is provided as subsidy. Nutrient-based subsidy is also being provided on the non-urea fertilisers.

In the petroleum, subsidies are provided on LPG and kerosene.