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The Government’s subsidies on food, fertiliser and petroleum are pegged at ₹3,35,361-lakh crore for 2021-22, about 43 per cent lower than the Revised Estimates for the current fiscal’s ₹5,95,355 crore. However, the overall subsidy bill for 2021-22 is estimated higher than the budget estimates of 2020-21 pegged at ₹2,27,794 crore.
The revised food subsidy bill saw a major increase in 2020-21 as the Centre provided free ration to the beneficiaries to mitigate the impact of Covid-induced lockdowns. Also, the provision for pre-payment of NSSF loans with FCI of about ₹1.5-lakh crore were the major reasons for the rise in food subsidy, according to the Budget document.
Fertiliser subsidy
Similarly, the fertiliser subsidy also saw a major increase in revised estimates for 2020-21 as the Government made additional allocation to an extent of ₹62,000 crore, which will be used for clearance of the subsidy backlog for the sector.
For FY21-22, fertiliser subsidy is pegged at ₹79,530 crore. Of this, the urea subsidy is estimated at ₹58,767 crore, lower than the revised estimates of ₹94,957 crore. Also, the nutrient-based subsidy for FY21-22 has seen a sharp reduction at ₹20,762 crore (₹38,989.88 crore RE 2020-21).
According to ICRA, the subsidy allocation for the fertiliser sector for FY21-22 at ₹79,530 crore is inadequate to meet the sector’s requirement. Varun Gogia, Senior Analyst, said ICRA estimates the subsidy requirement at around ₹90,000 crore to ₹100,000 crore.
Non-urea sector
A steep decline in the subsidy allocation for the non-urea fertilisers for FY2022 could lead to cash flow mismatches for the non-urea manufacturers. Thus, by the end of FY2022 we could witness rebuilding of the subsidy backlog in absence of additional allocation during the course of the year, said Gogia.
The Petroleum subsidy for 2021-22 has been reduced to ₹12,995 crore from ₹40,915 crore. This could be largely on account of reduced government support for domestic LPG cylinders and a stable trend in oil prices.
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