Budget 2025-26: Business as usual for farm, food, and petrol subsidies

The Union Budget for 2025-26 (FY26) seems to have assumed a “business as usual” approach when it came to key subsidies for fertilisers, food, and petrol.

 

The Budget estimated the total subsidies for the three items in FY26 to be around Rs 3.83 trillion, which is 0.01 per cent less than the Revised Estimate (RE) and just 0.6 per cent more than the Budget Estimate (BE) of FY25.

 

In other words, when it comes to major subsidies, the central government does not expect a major hike in the coming financial year.

 

The food subsidy for FY26 was estimated at Rs 2.03 trillion, which is 3.04 per cent more than the RE but 0.9 per cent lower than the BE of FY25.

 

This is surprising given that minimum support price (MSP) of both wheat and rice are expected to rise in the coming year but the sale price will remain zero for the next few years as part of the Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY).  ALSO READ: Govt proposes new tariff lines for rice, makhana products in Union Budget

 

In the case of fertilisers, the BE for FY26 shows that the government has assumed little change in urea and DAP (diammonium phosphate) prices in the coming financial year. 

 

“DAP prices are now around $640 per tonne, which is higher than the same period last year, while urea prices in the international markets have softened, meaning that overall the price impact could be neutral as of now,” a senior industry official explained.

 

The subsidy for non-urea fertilisers jumped by Rs 7,310 crore in the ongoing financial year to Rs 52,310 crore due to the special assistance of over Rs 3,700 crore granted twice during the year to ensure that DAP prices are maintained at their current levels of Rs 1,350 per 50-kg bag. The latest extension was announced on January 1 this year.

 

Sources said if the additional subsidy wouldn’t have been extended, fertiliser companies were planning to hike DAP rates by at least Rs 200 per bag to compensate for the under-recoveries due to increased cost of imports. DAP is the second-most consumed fertiliser in the country after urea.

 

For fertilisers, the Union finance minister also announced a new urea manufacturing plant having a capacity of 1.27 million tonnes per annum in Namrup, Assam.

 

In case of petroleum, the Budget assumes petrol subsidy to be around Rs 12,100 crore, which is 17.69 per cent lower than the RE of FY25.