Budget 2025: Subsidy bill set to fall to 6-year low

First, the discontinuation of the free, further 5-kg per period other foodgrains allocation to the 813.5 cardinal nationalist organisation strategy (PDS) beneficiaries.

The other atom oregon wheat — implicit and above the regular 5 kg/person/month PDS quota nether the National Food Security Act, 2013 — was fixed during the post-Covid play from April 2020 to December 2022. That ended from January 2023. With the yearly atom offtake done the PDS and different schemes falling — from 93.7 cardinal tonnes (mt) successful 2020-21, 105.8 mt successful 2021-22 and 93.1 mt successful 2022-23, to 67.7 mt successful 2023-24 and a projected 63.9 mt successful 2024-24 – and the government’s procurement arsenic good arsenic stocks successful godowns declining (translating into reduced carrying outgo of buffer beyond operational requirements), the nutrient subsidy is budgeted astatine conscionable Rs 203,420 crore successful the coming fiscal.

The supra subsidy deed an all-time-high of Rs 541,330 crore successful 2020-21, erstwhile the Finance Minister besides made a one-time proviso to wide outstanding dues to the Food Corporation of India. The second incurs an “economic cost” towards procuring, distributing and storing grain, with these estimated astatine Rs 39.75/kg for atom and Rs 27.74/kg for wheat. The subsidy arises from the aforesaid atom being issued wholly escaped to PDS beneficiaries.

The 2nd large crushed for the Centre’s little subsidy proviso is fertiliser. The fertiliser subsidy peaked astatine Rs 251,339 crore successful 2022-23, which resulted from precocious planetary prices pursuing Russia’s penetration of Ukraine.  Landed per-tonne prices of imported urea, di-ammonium phosphate (DAP) and muriate of potash (MOP) roseate to $900-1,000 (in November-January 2021-22), $950-960 (July 2022) and $590 (March 2022 to March 2023) respectively. Currently, these are ruling astatine $423-427 for urea, $633 for DAP and $283-285 for MOP. Even prices of cardinal inputs, phosphoric acerb and ammonia, person eased to $1,055 and $400 per tonne, from their highs of $1,715 (July-September 2022) and $1,575 (April 2022).

Landed prices have, however, firmed up a spot since astir May, particularly station the disruptions to vas movements successful the Red Sea from attacks by Yemen’s Houthi rebels. It has led to MOP cargoes from Russia, for instance, taking 45-50 days voyage clip to scope India via the Cape of Good Hope, alternatively of lone 30-33 days done the Suez Canal-Red Sea route. The fertiliser subsidy for 2024-25 has also, therefore, overshot the budget estimation of Rs 164,000 crore by astir Rs 7,300 crore.

“The Budget Estimate of Rs 167,887 crore for the coming fiscal is higher than what was provided successful 2024-25. Whether  much would beryllium required volition beryllium connected geopolitical factors and their impact, if any, connected planetary prices of some finished fertilisers and inputs,” said N. Suresh Krishnan, president of the Fertiliser Association of India.

Significantly, determination are nary increases successful the prices of fertilisers for farmers oregon that of foodgrains sold done the PDS successful the price. The maximum retail terms of urea has been unchanged since November 2012, portion the contented terms of PDS grains was slashed from Rs 2-3/kg to zero with effect from January 2023.