Food subsidy seen rising 12% in FY26; fertiliser support to ease
VB G RAM G gets Rs 95,692 crore in Fy-27; MGNREGA Rs 30,000 to clear pending dues and smoothen transition
 "Food subsidy seen rising 12% in FY26; fertiliser support to ease")
The Central government expects a steep 12.1 per cent increase in food subsidy in FY26 to around ₹228,154 crore due to higher wheat and rice purchases at increased costs and continued free distribution through ration shops as part of the Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY), a level it expects to continue in the coming financial year (FY27) as well, Budget documents tabled by Finance Minister Nirmala Sitharaman showed.
This also effectively means that any increase in the central issue price (CIP) of wheat and rice, and an early conclusion of the free foodgrains distribution scheme, seems remote for now — at least not in the coming financial year. The food subsidy was estimated at ₹203,420 crore in the Budget Estimates of FY26.
However, when it comes to fertilisers, the documents show that although the subsidy allocation has risen by 11.05 per cent in the current financial year (FY26) to ₹186,460 crore, as against the Budget Estimate of ₹167,887 crore, due to higher sales of subsidised urea and diammonium phosphate (DAP), the Centre expects a slight moderation in international prices in the coming year. As a result, it has provisioned 8.4 per cent less subsidy for fertilisers at ₹170,781 crore in FY27. In the case of fuel, the provision remains almost unchanged at ₹12,085 crore in FY27, compared with ₹12,100 crore in the Budget Estimate of FY26.
A few weeks ago, Fertiliser Association of India (FAI) Chairman and Managing Director and Chief Executive Officer of Coromandel International S. Sankarasubramanian told Business Standard that he expected the subsidy requirement in FY27 to come down as global phosphoric acid and rock phosphate prices, which are linked to imported DAP rates, are expected to soften.
He said that in FY26 there were recent spikes in sulphur and ammonia prices, with ammonia rising due to shutdowns by major Middle East producers, but if they resume production, prices should normalise. Sulphur, too, has risen recently but is expected to soften soon.
Meanwhile, on the controversial VB G-RAM G Act, the Central government has allocated ₹95,692 crore, while keeping just ₹30,000 crore for the now-defunct Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to clear pending dues in FY27.
The new Act is expected to be notified by the Centre from April 1, which will give states a six-month transition period within which they must individually notify the same, a senior official had recently clarified.