Centre May Set Aside Rs 4 Trillion For Next Fiscal's Food, Fertiliser Subsidies: Report

Union Budget 2024: Food and fertiliser subsidies account for about one-ninth of India's total budget spending of Rs 45 trillion during the current fiscal year that ends on March 31

The Ministry of Consumer Affairs, Food and Public Distribution has estimated next year's food subsidy bill at Rs 2.2 trillion ($26.52 billion), as per report. ( Image Source :Getty )

The central government may lay aside an amount of Rs 4 trillion ($48 billion) for food and fertiliser subsidies for the next fiscal year, citing two government sources privy to the development, news agency Reuters said. This move, if implemented, indicates fiscal caution ahead of this year's Union Budget and general elections. Union Finance Minister Nirmala Sitharaman will unveil the General Budget 2024 on February 1.

According to the report, food and fertiliser subsidies account for about one-ninth of India's total budget spending of Rs 45 trillion during the current fiscal year that ends on March 31. The Ministry of Consumer Affairs, Food and Public Distribution has estimated next year's food subsidy bill at Rs 2.2 trillion ($26.52 billion), the sources told Reuters. That is 10 per cent higher than a projected outlay of nearly Rs 2 trillion ($24.11 billion) for the current 2023-24 fiscal year.

One of the sources told the news agency that additionally next fiscal year's fertiliser subsidy is expected to be Rs 1.75 trillion ($21.10 billion), down from the current 2022-23 fiscal year estimate of nearly Rs 2 trillion.

The Ministry of Finance, the Ministry of Chemicals and Fertilizers and the Ministry of Consumer Affairs, Food and Public Distribution ministries of finance did not reply to requests for comment.

Maintaining the combined subsidies at their current level would be unusual for a government facing a national election in just a few months, but Prime Minister Narendra Modi is widely expected to win a rare third term in elections scheduled for April and May. Also, containing food and fertiliser subsidies is crucial for managing India's fiscal deficit, which Modi's government is targeting at 5.9 per cent of gross domestic product this year and planning to lower by at least 50 basis points in the fiscal year 2024-25.

Modi government's food subsidy bill is likely to go up next year as the Centre late last year extended its flagship free food welfare programme for the next five years. The government runs its multi-billion dollar food welfare programme, the world's biggest such initiative, by buying rice and wheat from millions of domestic farmers at state-set minimum or guaranteed prices and then supplying the staples for free to 800 million people.