Budget 2026: Food subsidy seen rising 12% in FY26 on higher procurement

Officials said the higher provisioning also means that the Food Corporation of India might not have to rely on borrowing or any other means in FY27 to fund its shortfall

The government on Sunday provisioned for a 12.1 per cent increase in food subsidy for FY26 Revised estimates to around ₹2.28 trillion due to higher wheat and rice purchases at an increased cost, bumper stocks and continued free sale through ration shops as part of the Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY). The level of subsidies is expected to continue in the coming financial year (FY27) Budget estimates as well, the budget documents tabled by Finance Minister Nirmala Sitharaman showed. 

Officials said the higher provisioning also means that Food Corporation of India (FCI) might not have to rely on any borrowing or other means in FY27 to fund its shortfall. 

 

Also, there won’t be any arrears this year as subsidy incurrent due to sale of rice through open market scheme and ethanol blending has been provided for in the Budget. Sources also said that a greater allocation for food subsidy could also signal that any increase in the central issue price (CIP) of wheat and rice, and early conclusion of the free foodgrains sale scheme seems remote for now. 

The food subsidy was estimated at ₹2.03 trillion in Budget Estimates of FY26. It is projected to rise to ₹2.27 trillion in Revised Estimate of FY26 and remain at nearly the same level. 

Under the Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY), the government distributes 5 kilogram of wheat or rice to almost 810 million beneficiaries every month for free. 

As on January 1, 2026, the Centre had actual rice and wheat stocks of around 58.40 million tonnes against a buffer requirement of just 21.41 million tonnes. 

However, when it comes to fertiliser, the documents show that though subsidy allocation has risen by 11.05 per cent in the current financial year (FY26) to ₹1.86 trillion as against the BE of ₹1.67 trillion due to higher sales of subsidised urea and di-ammonium phosphate (DAP). 

In FY27, the Centre expects a slight moderation in international prices, which is why it has provisioned 8.4 per cent less subsidy for fertilisers at ₹1.70 trillion in FY27. In case of fuel, the provision remains almost at the same level of ₹12,085 crore in FY27 as against ₹12,100 crore in BE of FY26. 

Overall, the subsidies are projected to go down by 3.1 per cent in BE of FY27 to ₹4.54 trillion as against the FY26 Revised Estimate of ₹4.69 trillion. The RE of FY26 is, however, 10.2 per cent higher than the BE of FY26 of ₹4.26 trillion. 

Few weeks back, Fertiliser Association of India (FAI) chairman Fertiliser Association of India (FAI) chairman and MD and CEO of Coromandel International S. Sankarasubramanian had 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 come down. 

He said that in FY-26 there were some recent spikes in sulphur and ammonia prices and ammonia went up due to shutdowns by major West Asia producers, but if they resume production, prices should normalise. Sulphur prices, too, have risen recently but are expected to soften soon.