Federal government food subsidies will likely increase by
30% over the 2.07 trillion rupees (US$25.14 billion) estimated in the budget.
Increased subsidies on food grain and fertilizer are likely
to strain the federal budget, even though the government has seen strong tax
collections this year. That could prompt it to cut other expenses to meet the
budgeted fiscal gap of 6.4% of gross domestic product (GDP).
As of end November, the Department of Expenditure has
already released food grain subsidies worth about 1.5 trillion rupees to the
state-run Food Corporation of India and states, according to a government
document seen by Reuters.
India’s food grain subsidy bill has jumped sharply since the
government announced a scheme in April 2020 to provide free rice or wheat to
about 800 million people to reduce the pressure on household incomes from the
COVID-19 pandemic.
The scheme has been slated to run from April 2020 to
December 2022, leading to a total expenditure of 3.9 trillion rupees (US$47.25
billion).
India's finance ministry has opposed an extension of the
measures, citing pressure on government finances.
But the costs could rise further if the government extends
the program beyond December 31, 2022 when it is set to end.
If the scheme is extended until March 2023, the cost will
shoot up to nearly 3.1 trillion rupees -- the second highest ever, the official
added.
India’s food grain subsidy bill totaled 2.9 trillion rupees
in 2021/22, when the government’s free food grain distribution scheme was
operational throughout the year.
For 2020/21, the government had spent about 5.3 trillion
rupees on food grain subsidies but this was partly because it chose to settle
past borrowings of the Food Corporation of India.
The Ministry of Finance and the Ministry of Consumer
Affairs, Food and Public Distribution did not immediately respond to emailed
queries from Reuters.
India's total federal government expenditure is estimated at
39.4 trillion for 2022/23.
The government is also staring at a high fertilizer subsidy
bill, over the estimated 1.05 trillion rupees in the budget, as the war in
Ukraine has led to a surge in prices.
