FY27 Budget may increase food subsidy by 7-8% to nearly ₹2.2 trillion

The Centre may raise FY27 food subsidy by around 7% to around ₹2.17 trillion as grain procurement and welfare distribution costs rise under the PMGKAY free foodgrain scheme

The Centre is looking at a 7-8 per cent increase in 2026-27 (FY27) Budget estimate (BE) of food subsidy from the FY26 BE of ₹2.03 trillion to somewhere around ₹2.17-2.19 trillion, according to preliminary inter-ministerial discussions.

 

These numbers, sources said, are based on very early assessment of grain procurement and distribution in FY27, and are subject to changes depending on the situation in the coming months. 

This could also mean that BE of FY27 could be a modest 3-4 per cent higher than the RE of FY26 “These are very initial estimates. Though the requirement is more, yet initial discussions show that the number could be around these levels provided all other factors remain as they are,” a senior official said. 

The Centre bears the food subsidy, which is the difference between the total economic cost of procuring and storing food grains (like wheat and rice) and the price at which they are distributed to beneficiaries under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). 

The budgeted economic cost of rice for FY26 is ₹41.73 per kg while that of wheat is ₹29.80 per kg. Under the PMGKAY, the Centre has been providing free food grains to almost 81.35 crore beneficiaries as a welfare measure since January 1, 2024, for a period of five years. PMGKAY is one the world’s largest free food grain distribution scheme. 

Since FY25 Budget, PMGKAY has subsumed all grain distribution schemes under the Public Distribution System (PDS), including National Food Security Act of 2013. As of January 1, 2023, the schemes for providing food subsidy to the Food Corporation of India (FCI) and the Decentralised Procurement (DCP) states under the National Food Security Act (NFSA) have been subsumed and clubbed together under PMGKAY. 

For FCI alone, sources said, the subsidy requirement for FY26 has been estimated at over ₹1.85 trillion. 

All entitled beneficiaries under PMGKAY get 5 kg of wheat, rice or both, or coarse cereals for free per month. According to latest data, as on October 1, actual stocks of rice and wheat together in the central pool was 67.64 million tonnes (mt) as against the buffer requirement of 30.77 mt., which is around 120 per cent more than the required quantity.