Budget 2025: Food, fertilizer subsidy pegged marginally higher at Rs 3.71 lk cr for FY26 February 1, 2025 by

Budget 2025: Food, fertilizer subsidy pegged marginally higher at Rs 3.71 lk cr for FY26

Introduction

The Union Budget 2025 has set aside Rs 3.71 lakh crore for food and fertilizer subsidies for the financial year 2025-26 (FY26), marking a marginal increase from the previous year. This allocation aims to ensure food security for the vulnerable sections of society and support the agricultural sector by making fertilizers more affordable for farmers. The government’s commitment to these subsidies reflects its continued emphasis on economic stability, rural development, and welfare initiatives.

Food Subsidy Allocation

The food subsidy component continues to be a significant expenditure, driven by the government’s flagship welfare schemes such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) and the National Food Security Act (NFSA). These schemes provide free or highly subsidized food grains to millions of beneficiaries, ensuring food security across the nation.

In Budget 2025, the food subsidy has been allocated Rs 2.1 lakh crore, slightly higher than the previous fiscal year. The increase accounts for additional food grain distribution costs and logistical expenses. The government aims to maintain sufficient buffer stocks and streamline the Public Distribution System (PDS) to enhance efficiency and minimize leakages.

Fertilizer Subsidy Support

Fertilizer subsidies remain crucial for supporting India’s agricultural sector, as they help reduce input costs for farmers and ensure the availability of essential nutrients like urea, phosphate, and potash at affordable prices. In FY26, the government has pegged the fertilizer subsidy at Rs 1.61 lakh crore, marginally higher than the allocation for FY25.

The increase in subsidy is attributed to fluctuating global fertilizer prices, rising import costs, and the government’s efforts to promote indigenous production. Additionally, initiatives such as the introduction of nano-fertilizers and a push towards balanced nutrient application are expected to optimize subsidy utilization while enhancing soil health and agricultural productivity.

Challenges and Fiscal Considerations

While the marginal increase in subsidy allocations is aimed at sustaining welfare programs, it also poses fiscal challenges. The government must balance subsidy expenditure with broader fiscal consolidation goals, ensuring that spending does not strain public finances. Policymakers need to explore targeted subsidy mechanisms, such as direct benefit transfers (DBT) for fertilizers, to improve efficiency and reduce misuse.

Inflationary pressures, international commodity price volatility, and geopolitical factors could impact subsidy costs, requiring adaptive strategies to manage expenses while safeguarding food and agricultural security. The government’s focus on sustainable agriculture and self-sufficiency in food production will be key in shaping future subsidy policies.

Future Outlook

Looking ahead, the government is likely to continue prioritizing food and fertilizer subsidies while exploring reforms to enhance distribution efficiency. Strengthening the use of technology, digital tracking of subsidies, and improved supply chain management will be critical in optimizing the impact of these allocations.

Additionally, efforts to boost domestic fertilizer production and reduce reliance on imports will play a crucial role in maintaining affordability for farmers. The shift towards eco-friendly fertilizers, sustainable farming practices, and precision agriculture are expected to shape long-term agricultural policy decisions.

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