Interim Budget 2024: Food, fertilizer, fuel subsidy bill to fall to 5-year low

Subject: Economy

Sec: Fiscal Policy

Context:

The Centre’s subsidy bill on the ‘3 Fs’ ie food, fertilizer and fuel , is slated to fall to a five-year-low of Rs 3,81,175 crore in 2024-25, as per the Interim Budget

More on news:

There are two main drivers for the decline.
The first is the discontinuation of the free, additional 5-kg monthly grain allocation to the 80 crore-plus public distribution system (PDS) beneficiaries under the Pradhan Mantri Garib Kalyan Anna Yojana.
The second driver for the Centre’s lower subsidy outgo is fertilizer.

Food subsidies:

The food subsidy is being projected at Rs 2,05,250 crore for 2024-25.
The extra rice or wheat is over and above the regular 5 kg/person/month PDS quota under the National Food Security Act which was given during the post-Covid period from April 2020 to December 2022.
That ended effective from the last calendar year.
This is down from the revised estimate (RE) of Rs 2,13,332 crore for this fiscal, Rs 2,72,802 crore for 2022-23 and Rs 2,88,969 crore for 2021-22.
Annual grain offtake through the PDS and other schemes falling to 64-65 million tonnes (mt) in 2023-24 (as against 92.9 mt in 2020-21, 105.6 mt in 2021-22 and 92.7 mt in 2022-23).
The government’s procurement as well as stocks in godowns also declining (translating into reduced carrying cost of buffer beyond operational requirements)

Fertilizer subsidy:

The fertilizer subsidy fell to Rs 188,894 crore in 2023-24 and is budgeted even lower at Rs 1,64,000 crore for the coming fiscal.
The second driver for the Centre’s lower subsidy outgo is fertilizer.
This bill soared to a record Rs 2,51,339 crore in 2022-23, following Russia’s invasion of Ukraine in February 2022 that led to skyrocketing international prices of fertilizers and raw materials.

Fuel subsidies:

It touched Rs 96,880 crore in 2012-13 and Rs 85,378 crore in 2013-14.
The petroleum subsidy fell subsequently with benign global crude prices and the present-day government limiting it only to sale of LPG cylinders and providing connections to poor/low-income households.
Retail prices of diesel and petrol have not been revised since they were last cut on May 22, 2022.
This has pushed up petroleum subsidy to Rs 12,000 crore levels in the current as well as ensuing fiscal.