 "Union Budget 2024: Govt slashes food, fertiliser, and fuel subsidy bill")
The Centres has reduced its subsidy layout for the '3 Fs' - food, fertiliser and fuel - in the full Budget presented by Finance Minister Nirmala Sitharaman on Tuesday.
The expenditure on the three big items on the Budget balance sheet is projected to be lower than the revised estimate (RE) of FY24. The reduction, however, is no different from the estimates projected in the February's interim Budget .
Breaking down the allocation for the current financial year (FY25), the Budget estimate for food subsidy was pegged at Rs 205,250 crore which was 3.34 per cent lower than the RE for FY24.
The fertiliser subsidy was fixed at Rs 164,000 crore, down 13.18 per cent from the revised estimate. Similarly, the fuel subsidy was estimated at Rs 11,925 crore, which was 2.57 per cent less than the revised estimate.
The whole food subsidy has now been clubbed under the Pradhan Mantri Gareeb Kalyan Anna Yojana (PMGKAY), under which the Central government has committed to provide five kilogrammes of free wheat or rice to all eligible beneficiaries each month for the next five years.
The reduction in food subsidy estimate could largely be due to the drop in wheat procurement and better management through increased sales via the open market sale scheme. Low stocks have also contributed to this fall.
More From This Section
In FY24, the Food Corporation of India (FCI) sold over 10 million tonnes of wheat through open market sales.
In the case of fertiliser subsidy, experts said, the actual subsidy expenditure had been consistently falling since 2022-23 due to a drop in international gas (LNG) prices, which is almost 80-85 per cent of the production cost of urea.
Gas prices have dropped from their peak of around $30-35 per million metric British Thermal Unit (MMBTU) to around $15-16 per MMBTU.
As the gas prices dropped, the cost of producing urea has also come down, and with it its subsidy expenditure from the government.
In the case of non-urea fertilisers, the fall in subsidy is largely due to a drop in international prices of phosphoric acid, ammonia, and also that of imported Di-Ammonia Phosphate (DAP).
India annually uses around 30-35 million tonnes of urea, of which around 7-9 million tonnes are imported. The domestic consumption of DAP is around 10-12.5 million tonnes, of which local production is around 4-5 million tonnes, while the rest has to be imported.
India’s urea imports have also come down of late to less than 5 million tonnes with the coming up of new production plants.
Experts said in case of fuel subsidies which have dropped, Oil Marketing Companies (OMCs) are now able to recover their fuel costs through retail sales.