Govt pegs food subsidy outgo for FY25 at ₹2.05 tr; breaches ₹2 tr for FY24

The government has pegged its food subsidy outgo for the 2024-25 financial year at ₹2.05 trillion, after it overshot its estimate for the ongoing fiscal year amid efforts to curb rising food prices and ensure domestic food security.

The government’s food subsidy bill has already hit ₹2.12 trillion in FY24, higher than the budgeted estimate of ₹1.97 trillion for the year.

The government provides subsidised food grains to states under the National Food Security Act, or NFSA, and other welfare schemes, including PMGKAY. FCI is reimbursed by the Centre for the gap between the cost and the subsidised price of food grains supplied to states.  

Mint on 17 January reported that the Union government’s food subsidy bill for FY24 was likely to overshoot the budgeted estimate and breach ₹2 trillion, prompting the food department to seek additional funds primarily to support its flagship welfare programme.

Containing spending on food subsidy is crucial for managing India’s fiscal deficit, which the government is targeting at 5.9% of gross domestic product for FY24, and 5.1% for FY25.

The food department spent ₹72,250 crore for decentralised procurement of foodgrains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme in FY24 against a budgeted estimate of ₹59,793; ₹1.39 crore on food subsidy to the Food Corporation of India as against the estimate of ₹1.37 crore; and ₹420 crore against ₹350 crore on sugar subsidy for families covered under the Antyodaya Anna Yojana programme.

Food inflation increased to 9.53% in December from 8.7% in November and 4.19% in December 2022. Retail inflation in vegetables was 27.64% in December as against 17.7% a month earlier. In pulses, inflation accelerated by 50 basis points sequentially to 20.73% in December.

“Given a hike in (minimum support price) of crops and other incremental expenses, including the extension to the free food scheme, the food subsidy bill is bound to increase,” a government official had told Mint earlier. 

The Centre recently extended the PMGKAY scheme, its flagship food welfare programme, for another five years ahead of this year’s general election.   

India 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 guaranteed prices and then supplying the staples at subsidised rates or for free to 800 million Indians.

The government spends some part of the food subsidy also on maintenance and other administrative costs. 

Over the previous 9 years, the government has released food subsidy amounting to ₹4.04 trillion to participating states, and ₹14.48 trillion to FCI.