Budget 2022-23: India Plans to Spend Over $40 Billion on Food and Fertilizer Subsidies

According to officials, India's budget for fiscal year 2022-23 would likely include nearly 3 trillion rupees ($40 billion) in food and fertilizer subsidies, roughly the same amount that the government projected for the current fiscal year, which ends in March.

Subsidy bills in India have skyrocketed as a result of pandemic relief measures for the poor and a dramatic surge in global chemical prices. New Delhi has already increased fertilizer subsidies twice this fiscal year, and sources say the payouts for 2021/22 may be the highest yet.

According to three officials who spoke on the condition of anonymity, the government will allocate 1.1 trillion rupees to fertilizer subsidies and 2 trillion rupees to food subsidies in the budget that Finance Minister Nirmala Sitharaman is expected to submit on Tuesday.

The fertilizer ministry had sought assistance of as much as 1.4 trillion rupees for 2022/23, another official said.

The finance ministry had budgeted 835 billion rupees for fertilizer subsidies for the current fiscal year, but the real outlay might reach a record 1.5 trillion rupees.

The majority of fertilizer subsidies are used to provide farmers urea at a lower government-fixed rates. The government also offers a specific amount of subsidies to firms who sell different fertilizers at reduced prices in order to assist farmers, a significant vote bank.

In 2021/22, India allocated 2.43 trillion rupees for food subsidies, but the government later provided an additional 600 billion rupees.

In the last few months of a fiscal year, India usually revises its budget for fertilizers and food subsidies upwards.

India's finance, fertilizer and food ministries did not immediately reply to emails and messages seeking comments.

Global fertilizer costs have risen by more than 200 percent over the last year, owing to unprecedented increases in the pricing of the two primary energy sources used to produce crop nutrients, coal and natural gas.

The 3 trillion rupee budget allocation for food and fertilizer subsidies is still greater than the seven-year average since Prime Minister Narendra Modi entered power, but it is significantly less than the 4.8 trillion rupees that the government may have spent on the same this year.

In India subsidies form a tenth of the total annual expenditure planned for the year.

Prime Minister Narendra Modi has attempted to achieve his long-term goal of lowering subsidies through combating corruption and incompetence. Any reduction in subsidies will have an impact on a large voter base of farmers, who account for approximately 60% of the population.

Elections in Uttar Pradesh, which is considered as a barometer for national elections in 2024, as well as key grain producer Punjab and three other states, will begin on February 10.