Finmin to engage with states over looming El Nino fallout

New Delhi: The finance ministry will soon hold discussions with states and key central ministries to assess the economic and fiscal impact of El Nino, including potential stress on agriculture, food inflation and higher subsidy outgo, as the country faces its weakest monsoon in 11 years.

The review is expected to focus on both state-level preparedness and the broader fiscal implications of possible crop losses, food inflation and relief measures to mitigate the impact, people aware of the discussion said.

The ministry has identified about 201 districts as vulnerable to varying degrees of El Nino-related climatic stress, which is expected to push the food subsidy bill up by ₹15,000-20,000 crore, according to the expenditure department.


The meteorological department has forecast the lowest levels of monsoon rains since 2015 due to strong El Nino conditions.

El Nino is a periodic warming of sea surface temperatures in the central and eastern Pacific Ocean, which results in severe heat and dry weather conditions in Southeast Asia and Australia.

The government review will involve officials from the ministries of finance, agriculture, rural, power and water resources, and will also assess loss of work hours due to extreme weather and adequate measures to ensure water and power supply to the affected districts.

Districts will be divided into three categories from severely affected to moderately affected, people cited above said.

"The idea is to have an overall assessment to draw up timely relief packages for states where required," a senior official told ET.

The government, he said, wants to ensure adequate supplies to mitigate any inflation spikes, and supply of power and water.

Earlier this week, finance minister Nirmala Sitharaman flagged concerns over headwinds from El Nino that could impact agricultural incomes and push up food prices.

Retail inflation inched up to 3.9% in May, while food inflation rose to 4.8%.

The official said the Centre has enough stocks of wheat and rice, but the government is anticipating some impact on the overall subsidy bill, already stressed due to the West Asia crisis.

While the FY27 budget estimate for food subsidies was initially set at ₹2.28 lakh crore, the food subsidy bill is now expected to be ₹2.50 lakh crore, on account of El Nino and higher minimum selling price for kharif and rabi crops.

Fertiliser subsidy, estimated at ₹1.77 lakh crore for FY27, is expected to rise 100% following spike in international prices due to West Asia crisis.