Rising Subsidy Expenses
For FY25, the government food subsidy is expected to go up by over Rs 35,000 crore more than the BE, to almost Rs 2. 42 trillion. This is after the country spent Rs. 2 in the FY24 food subsidy expenditure. 2 trillion, Rs 8,000 crore over the revised estimate (RE).
Factors Driving the Increase
This is because of the anticipated increases in the MSPs for wheat and rice, which are two of the major components of the subsidy. For the past two years, the MSPs of these crops have been increased by 5 to 7 percent per annum. As a result, the Economic Cost for rice and wheat is now at FCI has now reached more than Rs 39. 75/kg and Rs 27. 74/kg, respectively, for 2024-25.
Distribution of Funds
In FY24, Rs 1. Out of the total food subsidy of 4 trillion, Rs 80,000 crore was transferred to the FCI, and the remaining Rs 80,000 crore was distributed to other states that had decentralized procurement systems. The so-called “free ration scheme” had its role in raising the costs, as marginal payments were canceled from beneficiaries.
FCI’s Financial Projections
The FCI has forecasted expenses of Rs 1. 55 trillion for FY25. At present, FCI has about 30 million tonnes (MT) of rice stock as compared with the required buffer stock on April 1 of 13 MT. Of the total, 58 MT are planned to be produced, excluding 26 MT. 56 MT receivable from millers and 29 MT from the port of Singapore.
Extension of PMGKAY
The PMGKAY has been extended up to the end of 2028, which is expected to cost the government Rs 11 lakh crore. 8 trillion. This extension, coupled with an increase in MSPs and other costs is likely to put pressure on the food subsidy budget. Regarding the PMGKAY scheme, 5 kg each of rice or wheat is being distributed free of cost monthly to 801 million beneficiaries.
