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Subsidy bill nears ₹6 lakh crore in FY’21 mainly on extra free foodgrain distribution

In February 2020 Budget, presented in the pre-COVID scare, the government had estimated the subsidy bill at ₹ 2,27,794 crore.

The government’s subsidies on food, fertilisers, LPG and kerosene are pegged at ₹ 5.96 lakh crore in the current fiscal, over 2.5-fold jump from the initial budget estimates as the Centre distributed additional foodgrains free of cost to help poor mitigate the impact of COVID-19 pandemic.

In February 2020 Budget, presented in the pre-COVID scare, the government had estimated the subsidy bill at ₹ 2,27,794 crore. However, all the budget estimates, have undergone major revisions as the country imposed strict lockdown to check the spread of COVID-19.

On Monday, Finance Minister Nirmala Sitharaman presented revised numbers of major subsidies.

According to the document, the subsidies on food, fertilisers and petroleum (LPG and kerosene) are estimated to fall by 43 % to ₹ 3.36 lakh crore in the next financial year from ₹ 5.96 lakh crore in the revised estimate of the current fiscal.

Subsidies have been pegged at ₹ 5,95,620.23 crore in the revised estimate (RE) for 2020-21 fiscal year as against ₹ 2,27,793.89 crore in the Budget Estimate (BE) of 2020-21. The subsidies for 2021-22 are projected at ₹ 3,36,439.03 crore, which is lower than RE of the current fiscal but higher than the BE of 2020-21.

According to the data, food subsidy rose sharply to ₹ 4,22,618.14 crore in the RE of 2020-21 from 1,15,569.68 crore in the BE. For the next fiscal, food subsidy is estimated at ₹ 2,42,836 crore.

The government’s decision to provide free ration to citizens during Covid-19-related lockdown and provisioning for the pre-payment of NSSF loans with FCI of about ₹ 1.5 lakh crore were the major reason for rise in food subsidy, the document said.

The Centre provided an additional quota of foodgrains at free of cost during April-November period of this fiscal year to over 80 crore beneficiaries. Free rations were also given to migrant labourers.

Fertiliser subsidy has been pegged at ₹ 1,33,947.3 crore in the RE of 2020-21 from ₹ 71,309 crore in the BE of the current fiscal year. For the next fiscal, a ₹ 79,529.68 crore has been provided in the BE.

The subsidy for petroleum products (LPG and kerosene) is ₹ 39,054.79 crore in the RE as against ₹ 40,915.21 crore in the BE for the current fiscal. Only ₹ 14,073.35 crore has been provided for petroleum subsidy in the 2021-22 financial year.

Food subsidy is provided to meet the difference between economic cost of food grains procured by the government and their sales realization at the PDS rate called central issue price (CIP) under the National Food Security Act (NFSA) and other welfare schemes.

Similarly, the Centre provides fertiliser subsidy to manufacturers.

The government fixes the MRP of urea being sold in the market. The difference between the selling price and production cost is provided as subsidy. Nutrient-based subsidy is also being provided on the non-urea fertilisers.

In the petroleum, subsidies are provided on LPG and kerosene.

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