The subsidy bill on food, fertilizer, and petroleum is budgeted 28 per cent lower than the revised estimates at Rs 3.74 lakh crore in FY 24. However, the subsidy during the current fiscal would shoot up by 17 per cent this fiscal year to Rs 5.21 lakh crore.

According to the budget document, the government has pegged total subsidies on food, fertilizers, and petroleum at Rs 5,21,584.71 crore in its revised estimate (RE) for 2022- 23, as against the budget estimates of Rs 4,46,149.24 crore in the last fiscal year.

Subsidies in FY23, were higher than the budget estimate as the government had to step up support in the form of free food grains and fertiliser subsidies amid higher commodity inflation.

For fiscal 2023-24, fertiliser subsidy is estimated to fall to Rs 1,75,099.92 crore from Rs 2,25,220.16 crore this fiscal year. Petroleum subsidies are estimated to come down to Rs 2,257.09 crore from Rs 9,170.50 crore in the current fiscal.

Food subsidy is estimated to fall sharply to Rs 1,97,350 crore next fiscal year from Rs 2,87,194.05 crore in 2022-23 as the government has discontinued a free foodgrains scheme that was launched during the pandemic.

Food subsidy is provided to meet the difference between the economic cost of foodgrains procured by the government and their sales realisation at the PDS rate called central issue price (CIP) under the National Food Security Act (NFSA) and other welfare schemes.

Similarly, the Centre provides fertiliser subsidies to manufacturers. The government fixes the MRP of urea being sold in the market. The difference between the selling price and production cost is provided as a subsidy. A nutrient-based subsidy is also being provided on non-urea fertilisers like DAP and MOP. In petroleum, subsidies are mainly provided for LPG.