Subsidy bill to fall 43% to Rs 3.36 trillion in FY22: Budget 2021

The government on Monday projected the subsidy bill on food, fertilisers, LPG and kerosene oil to fall by 43 per cent in the next fiscal to Rs 3.36 lakh crore from Rs 5.96 lakh crore in 2020-21 that witnessed the distribution of free foodgrains to about 80 crore poor towards COVID-19 impact mitigation.

As per the Budget 2021-22 documents presented in Parliament on Monday, the major subsidies are estimated to jump over 2.5 times to Rs 5.96 lakh crore this fiscal as against the estimates prepared in the February 2020 Budget.

Under its Aatmanirbhar Bharat packages, the government distributed additional 5 kg food grains per person each month during April-November period as the economic activities came to a screeching halt following the lockdown in late March. The lockdown has been now significantly eased.

In February 2020 Budget, presented in the pre-COVID scare, the government had estimated the subsidy bill at Rs 2,27,794 crore.

On Monday, Finance Minister Nirmala Sitharaman presented revised numbers of major subsidies. As per the revised estimates (RE) for the current financial year, the subsidies are pegged at Rs 5,95,620.23 crore.

The documents revealed that 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 financial year beginning April 1, 2021. This is lower than the revised estimates for the current fiscal but higher than the original estimates.

According to the data, food subsidy rose sharply to Rs 4,22,618.14 crore in the RE of 2020-21 from Rs 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 the rise in food subsidy, the document said.

The Centre provided an additional quota of foodgrains at free of cost during April-November period this fiscal 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, up from Rs 71,309 crore in the BE of the current fiscal. For the next fiscal, the initial estimate is Rs 79,529.68 crore.

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. However, 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 realisation 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 the MRP of urea being sold in the market. The difference between the selling price and production cost is provided as subsidy. The nutrient-based subsidy is also being provided on the non-urea fertilisers.

In petroleum, subsidies are provided on LPG and kerosene.