Subsidy allocation likely to stay at Interim Budget mark of Rs 4.1 lakh crore

The government is likely to stick to the₹ 4.1 lakh crore subsidies allocation for 2024-25 announced in the interim budget in February, according to people with knowledge of the matter.

The allocation was 7% lower than the revised estimate of ₹4.41 lakh crore for 2023-24. "We do not see any change in the estimate of our subsidy bills than what we had pegged in February," a senior official told ET on condition of anonymity, adding that the allocation was done after considering the pertinent domestic and global factors.

However, the outlay for rural schemes could be raised, he said.

The official said the Centre would stick to its fiscal targets, which entail reducing the fiscal deficit to 5.1% of the gross domestic product in this financial year from the revised estimate of 5.8% for 2023-24. "There will be no deviation from the fiscal roadmap and there is enough headroom to put money on schemes which have multiplier effect," the official said.

In the interim budget, the allocation for the food subsidy was ₹2.05 lakh crore, slightly lower than the revised estimate for the previous fiscal. Officials said the allocation was made after factoring in fluctuations in food prices.

The food subsidy had reached ₹2.87 lakh crore in 2022-23.

The fertiliser subsidy for this fiscal is pegged at ₹1.64 lakh crore, lower than the revised estimates for 2023-24. "We will be doing much better in fertiliser subsidy with decreasing dependency on imports, softening fertiliser prices and increasing domestic productions," said another official, who did not wish to be identified.

The Centre plans to expand the usage of nano urea and expects to increase usage of nano di ammonium phosphate (Nano DAP) which is likely to be extended to all agro-climatic zones, as announced by finance minister Nirmala Sitharaman in her interim budget speech.

Fuel subsidy has been pegged at ₹11,925 crore, almost the same as the revised estimate for 2023-24 but higher than the budgeted estimate for the previous fiscal. The increase was mainly due to extension of the cooking gas subsidy to ₹300 per cylinder to about 96 million low-income households, ahead of assembly elections in five states, which inflated the LPG subsidy bill.