India's subsidies may cost the govt Rs 50,000 cr more than its FY24 Budget

India's overall subsidy bill may surge by Rs 50,000 crore this fiscal year because of increased expenditure on fertiliser, cooking gas and food security, a report by the Economic Times (ET) said. The government aims to cover this higher spending from savings under other heads in its Rs 45 trillion FY24 budget, it said.

The subsidy outgo for FY24 was planned at Rs 4.03 trillion, but it could rise up to Rs 4.53 trillion. Even with this stretched welfare spending, it would be significantly less than the previous fiscal's subsidy bill of Rs 5.62 trillion.

"There will be Rs 50,000 crore additional outgo towards the subsidy bill in the revised estimates on account of higher food, fertiliser, and LPG subsidy. However, it would be met out of savings in spending on other heads," a senior government official was quoted as saying by ET.

The fertiliser subsidy may see the sharpest rise — by Rs 25,000 crore from Rs 1.75 trillion budgeted for FY24. Food and cooking gas subsidies could increase by Rs 15,000 crore and Rs 10,000 crore, respectively. The overall outgo, according to the official, was still at a comfortable level.

"We have enough headroom and this is certainly much lower than the revised estimate last year, as we had been able to plug leakages in fertiliser subsidy," said the official cited earlier.

The Centre allocated Rs 1.05 trillion for fertiliser subsidy in FY23, which was revised to Rs 2.54 trillion due to a sharp rise in fertiliser prices caused by the Russia-Ukraine war.

The extension of the cooking gas subsidy to Rs 300 per cylinder to about 96 million low-income households, ahead of Assembly elections in five states, has already inflated the LPG subsidy bill. The Centre, which had budgeted Rs 2,257 crore for LPG subsidy this fiscal year, will seek an additional Rs 10,000 crore in the supplementary demand for grants itself at the upcoming Winter Session of Parliament.

The food subsidy, which reached Rs 2.87 trillion in FY23, has been set at Rs 1.97 trillion this fiscal year. Higher procurement costs and extension of the free foodgrain scheme, on the other hand, may add Rs 15,000 crore to the overall bill this fiscal year.