Budget impact: 7.8% cut in subsidy outlay for food, fuel & fertiliser

Among notable announcements that Finance Minister Nirmala Sitharaman made in the Union Budget 2024 for FY25 is the reduction in subsidy amounts allocated to the food, fuel and fertiliser sectors by 7.8 per cent.

The subsidy amount for the ongoing fiscal year of 2024-’25, or FY25, is Rs 3,81,175 crore while it was Rs 4,13,466 crore in FY24. This decrease in subsidy is in sync with what was predicted in the Interim Budget that was presented in February this year.

FOOD SUBSIDY

The food subsidy for FY25 is Rs 2,05,250 crore. The amount marks a drop from the estimated figure of Rs 2,12,332 crore in FY24.

This food subsidy is meant to make up for the disparity between the cost price in which the centre buys food grains and the selling price of the grains as per the National Food Security Act (NFSA) and other similar welfare programmes aimed at aiding at least 80 crore people in the country.

FUEL SUBSIDY

As far as the fuel sector goes, subsidies have been marginally reduced mainly for Liquefied Petroleum Gas (LPG) that is used for cooking. The revised subsidy has dropped from Rs 12,240 crore in FY24 to Rs 11,925 crore in FY25.

The subsidy adjustment for the fuel sector is in sync with projections that the Interim Budget had made in February, and highlights the Centre’s strategy to continue with welfare programmes and maintain financial consolidation at the same time.

FERTILISER SUBSIDY

For the fertiliser sector, too, Budget 2024 for FY25 has inflicted a subsidy slash. The subsidy for the fertiliser industry in FY25 is Rs 1,64,000 crore, compared to revised estimates of Rs 1,88,894 crore for FY24.

Fertiliser subsidy is meant to act as a support system for the industry. The subsidy also facilitates the maintenance of low prices of urea and non-urea products that in turn helps farmers who use these fertilisers.