Finance ministry rejects hike in food subsidy bill, pushes for open market grain sales

New Delhi: The finance ministry has rejected a proposal to raise food subsidy outlay to ₹2.20 lakh crore from ₹2.03 lakh crore in the revised estimates for this financial year.

The Department of Food and Public Distribution had sought higher allocation citing a surge in grain distribution costs under the public distribution system, including increasing manpower and transportation expenses, as well as the need for additional warehousing to store surplus stocks.

The Department of Expenditure, under the finance ministry, instead suggested liquidation of surplus grains in the open market and expediting beneficiary database clean-ups to curb leakages, officials said.


"The expenditure ministry is taking a very nuanced approach to demands... ministries have to provide due justification for any upward revision," said a senior official, who did not wish to be identified.

The food subsidy bill constitutes more than half of the government's overall subsidy bill. It stood at ₹1.99 lakh crore in 2024-25, as per the government's provisional data, lower than the revised estimate of ₹2.05 lakh crore.

The official said that while the department can consider urgent and genuine requirements, it has to ensure that funds are spent in a prudent manner.

Another official said offloading surplus grains at a higher reserve price can offset at least part of the cost incurred to keep the subsidy burden under control.

The Food Corporation of India (FCI) has so far offloaded 6.1 million tonnes of rice through open market sale, allocations to states for their social welfare programmes, ethanol manufacturing and Bharat rice initiative, and plans to offload some more before March 2026.

But the government has directed it to offload more grain in the open market and allocate more for grain-based ethanol producing units given the increasing cost of holding surplus rice.

The FCI had 44.957 MT of rice in stock on October 1, more than four times the buffer stock requirement of 10.25 MT prescribed by the government. It is expected to allocate some amount of wheat for open market sale in the next few weeks.