India foodgrain subsidy bill to surge 30% to $33B this year – source

Ibrahim Shaikh, a farmer, winnows paddy in a field at Kadadhe village in the western state of Maharashtra, India, October 17, 2022. REUTERS/Rajendra Jadhav/File photo

New Delhi  – India’s spending on subsidized foodgrain to the poor may rise to 2.7 trillion rupees ($32.74 billion) this fiscal year, as the government continues to provide support to the poor at least until December, according to a government official and a document reviewed by Reuters.

Federal government food subsidies will likely increase by 30 percent over the 2.07 trillion rupees ($25.14 billion) estimated in the budget, the official said, speaking on condition of anonymity as discussions are confidential.

Increased subsidies on foodgrain and fertilizer are likely to strain the federal budget, even though the government has seen strong tax collections this year. That could prompt it to cut other expenses to meet the budgeted fiscal gap of 6.4 percent of gross domestic product (GDP), Reuters reported.

As of end November, the Department of Expenditure has already released foodgrain subsidies worth about 1.5 trillion rupees to the state-run Food Corporation of India and states, according to a government document seen by Reuters.

India’s foodgrain subsidy bill has jumped sharply since the government announced a scheme in April 2020 to provide free rice or wheat to about 800 million people to reduce the pressure on household incomes from the COVID-19 pandemic.

The scheme has been slated to run from April 2020 to December 2022, leading to a total expenditure of 3.9 trillion rupees ($47.25 billion).

India’s finance ministry has opposed an extension of the measures, citing pressure on government finances.

But the costs could rise further if the government extends the programme beyond Dec. 31, when it is set to end.

If the scheme is extended until March 2023, the cost will shoot up to nearly 3.1 trillion rupees — the second highest ever , the official added.

India’s foodgrain subsidy bill totalled 2.9 trillion rupees in 2021/22, when the government’s free food grain distribution scheme was operational throughout the year.

For 2020/21, the government had spent about 5.3 trillion rupees on foodgrain subsidies but this was partly because it chose to settle past borrowings of the Food Corporation of India.

The Ministry of Finance and the Ministry of Consumer Affairs, Food and Public Distribution did not immediately respond to emailed queries from Reuters.

India’s total federal government expenditure is estimated at 39.4 trillion for 2022/23.

The government is also staring at a high fertiliser subsidy bill, over the estimated 1.05 trillion rupees in the budget, as the war in Ukraine has led to a surge in prices.