The Union government is expected to witness a significant reduction of 21% in total expenditure on explicit subsidies – covering food, fertilizers, and LPG – during the ongoing fiscal year, dropping from Rs 5.24 trillion in FY23 to Rs 4.13 trillion. However, the interim budget for 2024-25 outlines a provision of Rs 3.81 trillion for subsidies, marking an 8% decrease compared to the revised estimate for FY24.

This decline can be attributed to the softening of global prices for soil nutrients and the conclusion of additional grain supplies under the National Food Securities Act (NFSA) effective December 2022. The revised estimate for the current fiscal year indicates a total spending of Rs 4.13 trillion on the three subsidies, with Rs 2.12 trillion allocated for food and Rs 1.88 trillion for fertilizers.

In FY23, the government allocated Rs 2.72 trillion for the food subsidy due to the additional foodgrains provided under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) and highly subsidized food grains supplied under NFSA during the first three quarters of the fiscal year. The PMGKAY, integrated with NFSA from January 2023, supplies around 48 million tonnes of food grains free to 800 million beneficiaries annually. The extension of the free ration scheme until the end of 2028 is expected to cost the exchequer approximately Rs 11.8 trillion.

Finance Minister Nirmala Sitharaman, in her interim budget speech for 2024-25, emphasized the elimination of concerns about food security through the free ration program (PMGKAY) for 800 million people. She highlighted the periodic increase in minimum support prices for agricultural produce, contributing to enhanced real income in rural areas.

According to the revised estimate for FY24, the fertilizer subsidy is projected at Rs 1.88 trillion, a 25% decline from the record Rs 2.51 trillion in FY23. For the upcoming fiscal year, subsidies for soil nutrients are estimated at Rs 1.64 trillion.

Meanwhile, the LPG subsidy for the current fiscal, as per the revised estimate, amounts to Rs 12,240 crore due to the release of 7.5 million additional LPG connections under the Pradhan Mantri Ujjwala Yojana. The budget for FY25 has earmarked Rs 11,925 crore for LPG subsidies.