Lockdown response: Centre’s subsidy bill may overshoot budgeted amount for FY21

The Centre’s subsidy bill for the current fiscal is likely to be higher than the budgeted ₹2.27-lakh crore by at least ₹40,000 crore, largely on account of higher spending on food and fertiliser.

Data with the Comptroller General of Accounts (CGA) show that expenditure by the Department of Fertilisers touched 92 per cent of the budget estimate (BE) by November this fiscal, while spending by the Department of Food and Public Distribution has already exceeded the full year target to touch 108 per cent of the BE.

Low oil prices helped contain the expenditure by the Ministry of Petroleum at 54 per cent of the BE by end-November 2020.

“On account of fertilisers and food, we may see an increase of ₹40,000-50,000 crore in the revised estimates (RE) for subsidy in 2020-21 compared to the BE,” said Devendra Pant, Chief Economist, India Ratings and Research (Fitch Group). He added that the subsidy bill is also likely to be higher for FY22 compared to BE FY21, but possibly lower than RE FY21.

However, experts say the increased subsidies will not have much of an impact on the exchequer.

The overall expenditure is largely under control, and the real shock is likely to come from low revenue receipts.

The higher outlay on subsidy must also be seen in the backdrop of the Covid-19 pandemic and lockdown, with the Centre announcing relief measures under the Pradhan Mantri Garib Kalyan Yojana.

Food subsidy scheme

This includes the PM Garib Kalyan Anna Yojana that covered more than 80 crore people. Each family was provided with 5 kg of free wheat or rice, along with 1 kg free whole chana, per month. The Centre is bearing 100 per cent of the financial burden of the scheme.

Subsidies from the Centre and State have seen a steady uptake by beneficiaries, as can be seen from Direct Benefit Transfer (DBT) data since even before the pandemic. Total DBT transfers so far this fiscal amount to over ₹2.61-lakh crore through 225.4 crore transactions, against ₹3.81-lakh crore last fiscal through 438 crore transactions.

Total beneficiaries

About 75.8 crore people have benefited through cash transfers and another 71.91 crore through DBT in kind.

In the current fiscal, PDS (public distribution system) transfers through DBT amount to ₹50,695 crore while for fertiliser they add up to ₹54,763 crore. Similarly, DBT transfers for MGNREGA scheme stood at ₹50,221 crore.

Cash transfers under various schemes have also seen robust response from beneficiaries, as can be inferred from data on Aadhaar-enabled Payment System, where the value and volume of transactions have risen steadily this year.