Emerging out of Covid woes: Outlay on subsidies, MGNREGA lower as pandemic disruptions cease

Take the food subsidy bill, which was elevated during 2020-21 to 2022-23, mainly due to the provision of 5 kg of additional grain per month, free of cost, to over 81 crore Indians. This free grain, under the Pradhan Mantri Garib Kalyan Anna Yojana, was over and above their regular monthly 5-kg ration at Rs 2/kg (wheat) and Rs 3/kg (rice). PMGKAY was operational for much of these years and discontinued after December 2022. While there will be no more additional free grain, the Narendra Modi government has, however, decided to make available the basic 5-kg quota free of cost (instead of Rs 2-3/kg) with effect from January 2023.

On the whole, Sitharaman has budgeted a food subsidy of Rs 197,350 crore for 2023-24, the lowest since 2019-20 and way below the peak of Rs 541,330 crore for 2020-21 (which also had to do the Modi government making a one-time provision to clear all dues to the Food Corporation of India).

The apparent normalisation of economic activity – and, hence, no perceived need for special alleviation measures – also accounts for the outlay on MGNREGA being projected at Rs 60,000 crore for 2023-24. This is against the current fiscal’s revised estimate of Rs 89,400 crore, Rs 98,467.85 crore for 2021-22 and the all-time-high of Rs 111,169.53 crore in 2020-21. The Rs 60,000 crore MGNREGA budget is, in fact, below even the Rs 71,686.70 crore spent in 2019-20 and Rs 61,815.09 in 2018-19, while the lowest since the Rs 55,166.04 crore of the preceding year.

In fertiliser subsidy, the record Rs 225,220 crore expenditure in the revised estimate for 2022-03 is largely courtesy of the Russia-Ukraine war. The war-induced supply disruptions led to international prices of fertilisers as well as their intermediates and raw materials spiking. But these have significantly eased in the last few months. Landed prices of urea imported into India (cost plus freight) have come down from $900-1,000 per tonne in December-January 2021-22 to $450 levels. So have those of di-ammonium phosphate (from $950-960 per tonne in July 2022 to $650-660), phosphoric acid ($1,715 per tonne in July-September 2022 to $1,175), ammonia ($1,575 per tonne from April 2022 to $850) and sulphur ($500-525 per tonne in April-June 2022 to $100).

The fall in global prices is expected to bring down the fertiliser subsidy outgo for the coming fiscal by over Rs 50,000 crore. “The budget provision of Rs 175,099.92 crore is reasonable and in line with the recent international price movements,” said N. Suresh Krishnan, chairman of the Fertiliser Association of India.