The Modi government’s second Budget 3.0 may include slightly higher food subsidy allocations in FY26 compared to FY25, driven by higher food inflation and higher logistics costs, according to Business Today Television sources. However, fertilizer subsidies are expected to remain stable, reflecting expected trends in fertilizer prices for 2025-2026.
In the post-election budget presented in July 2024, the government allocated Rs 205,250 crore for food subsidy, which is 3.34 per cent lower than the revised estimate for FY24. Fertilizer subsidy was pegged at Rs 164,000 crore, 13.18 per cent lower than for renewable energy, in While fuel subsidy was estimated at Rs 11,925 crore, reflecting a decline of 2.57%.
But according to the latest data and sources, the combined food and fertilizer subsidy bills have exceeded their initial allocations. The revised estimate for FY 2025 is expected to be 10-12% higher than the original allocation for this support.
The increase in food support requirements is due to concerns about food security, fueled by fears of worsening food price inflation, and higher minimum support prices for wheat and rice.
“Our food subsidies were reduced in the July budget due to the open market sale plan,” an official said.
For fertilizer subsidy, the government initially allocated Rs 1.64 lakh crore but later added Rs 6,594 lakh crore in December, taking the total to Rs 1.7 lakh crore. The cooking gas subsidy, set at Rs 11,925 crore, is expected to remain unchanged.
Managing these high allocations will be difficult for the Ministry of Finance due to financial pressures. Increased support spending could strain the fiscal deficit, reducing the scope of development expenditures. Sources indicate that the government may work to balance this by slightly reducing capital spending or increasing revenue collection.
The government had initially pegged the total subsidy bill for FY25 at Rs 3.81 lakh crore, but is likely to revise this amount upwards in the upcoming budget. A similar allocation is expected for fiscal year 2026.