More than $40 billion for food and fertilizer subsidies in budget: report
According to officials, the Center has budgeted roughly the same amount for this fiscal year ending in March.
As the COVID-19 crisis hit the country’s economy, the Modi government had to increase spending on subsidies and social protection programs. This has led to massive grant bills for the current fiscal year. A sharp rise in global chemical prices also contributed to this development.
Payouts for 2021-22 could be the highest yet.
In the next budget, the government is likely to allocate Rs 1.1 lakh crore for fertilizer subsidies, while Rs 2 lakh crore for food subsidies, three officials told the news agency.
Union Finance Minister
The Ministry of Finance had budgeted Rs 83,500 crore for fertilizer subsidies in the current financial year. However, the actual allocation could reach a record high of Rs 1.5 lakh crore.
How does the fertilizer subsidy work?
Most fertilizer subsidies are used to provide urea at a cheaper rate set by the government to farmers. In addition, the Center also provides a fixed amount of subsidy to companies for selling other fertilizers at lower rates to help the farmer.
The Center compensates public and private fertilizer companies such as Coromandel International Ltd Chambal Fertilizers and Chemicals Ltd, Gujarat Narmada Valley Fertilizers & Chemicals Ltd and Rashtriya Chemicals and Fertilizers Ltd for selling nutrients to the millions of farmers across the country at reduced rates.
Impact of the COVID crisis
The COVID-19 pandemic has led the Modi government not only to distribute but also to procure unprecedented quantities of cereals. In addition, 5 kg of free grain per person per month is given under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), in addition to the regular quota of 5 kg of wheat or rice at Rs 2 and Rs 3/kg , respectively.
This has become the government’s main social safety net program, both during and after the COVID-induced lockdown.