The government subsidy on account of food, fertiliser and fuel as well as allocation for the farm sector (including dairy and fisheries) together at ₹4.47 lakh crore constitute over 11 per cent of next year’s Budget expenditure of ₹39.45 lakh crore, even as there is 2.6 per cent reduction in allocation from the Budget estimate and 19.1 per cent drop from revised estimate of current fiscal.

The share of these subsidies and grants were 13 per cent of the total expenditure in FY22 (BE).

The government’s expenses under agriculture, animal husbandry, dairy and fishery sectors have been pegged at ₹1.29 lakh crore, up by 5 per cent from the current year’s ₹1.22 lakh crore.

Next focus, fertiliser

“Considering the practice of raising the subsidy during the revised estimates, it cannot be concluded that the government has cut these allocations. In view of the call of the Prime Minister and also the Finance Minister in her Budget speech that chemical-free natural farming will be promoted throughout the country, the next focus may be on fertiliser after abolishing the fuel subsidy,” said a former official of the Fertiliser Association of India.

Since there was no popular announcements in the Budget even amid the crucial assembly poll in Uttar Pradesh and other States, the government may move in phases to finally abolish the fertiliser subsidy or substantially reduce it, the official said adding there is hardly any scope for reducing food subsidy.

According to the Budget 2022-23, the allocation of urea subsidy has been raised by 7 per cent to ₹67,186.78 crore against ₹62,786.28 crore in FY22 (BE). Similarly, it is 102.7 per cent hike to ₹42,000 crore in case of phosphorous (P) and potash (K). But, the next year’s allocation is substantially lower compared with revised allocations for current year — 21 per cent in urea and 35 per cent in P and K.

According to the Economic Survey the import of potash, a nutrient in which country is fully dependent on other countries, was 17.4 lakh tonne (lt) during April-December of the current fiscal as against 42.3 lt in FY21. Similarly, the urea import was 59.6 lt as against record 98.3 lt in whole of last fiscal. Whereas in case of DAP, the import was at 40.1 lt as against 48.8 lt. Whatever next import will take place is meant for next kharif, so the industry will wait to see the actual per tonne subsidy for P and K before contracting any quantity, the industry official said.

The government has already brought Potash Derived from Molasses (PDM) under subsidy scheme to give a push to its manufacturing by sugar mills as a by-product to reduce import dependence.

‘Food subsidy may go up’

Meanwhile, with the electoral dividends from the free foodgrains under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), the food subsidy allocation has been pegged at ₹2.07 lakh crore for 2022-23, which is 15 per cent lower from ₹2.43 lakh crore allocated this year. The current year’s allocation has been raised to ₹2.86 lakh crore in the revised estimates factoring the expenses incurred on PMGKAY.

“The food subsidy may further go up if the government decides to continue PMGKAY next year and it all depends on the Covid situation and also on the economic revival,” said a Food Ministry official.

Subsidy on LPG cylinder is estimated to drop 58.7 per cent to ₹5,812.5 crore during the 2022-23 fiscal as against ₹14,073.35 crore in the current fiscal (BE). However, the revised estimates for current year has put LPG subsidy at ₹6,516.92 crore. The subsidy on kerosene, petrol and diesel has already been abolished.