Wednesday, 09 Oct, 2024
By: Anshul Vipat
The tremendous strain on subsidies has now forced the government to look for alternatives to cut their spending
The tremendous strain on subsidies has now forced the government to look for alternatives to cut their spending. This includes not extending the PMGKY and introduction of new schemes like PM-PRANAM. In the latter, which is likely to be introduced soon, the government will incentivise the states that use lesser amounts of chemical fertilisers in a particular year. The proposed scheme will help the government reduce its subsidy burden on chemical fertilisers, which is estimated to increase by 39 percent from Rs 1.62 lakh crore last year to Rs. 2.25 lakh crore in 2022-2023.
The subsidy strain
If we analyse the union budget paper for previous years, we can see a small but continuous decline in Centre’s spending on food and fertiliser subsidy. For instance, between 2015-16 and 2019-20, the aggregate outlay on the two fell, both in absolute terms (from Rs 211,834 crore to Rs 189,813 crore) as well as share of the Centre’s total expenditure (from 11.8% to 7.1%). A further drop was estimated in the budget for 2020-21. Unfortunately, the COVID-19 pandemic washed out the projection.
In the 2020-21 revised estimate, the government's spending on food and fertiliser subsidy stood at 556,565 crore. Both the subsidies absorbed more than 15 percent of the total budget. The same trend continued the following year as well. In its revised budget estimate for the 2021-22 fiscal, the government pegged total subsidies to be at Rs 4,33,108 crore. Although this was lower than 2020-21 spending, but it was still higher than the pre-pandemic era.
Talking about fertiliser subsidy, a total of 1.62 lakh crore was spent in 2021-22 against the estimate of Rs 79,530 crores. The finance ministry, in May, declared an additional fertiliser subsidy of Rs 1.10 lakh crore for the present year. It is estimated that the subsidy figure could cross Rs 2.25 lakh crore in 2022-23 against the budgeted estimate Rs 1.05 lakh crore.
Govt hopes ease in subsidies through PM-PRANAM
In his speech on August 15, Prime Minister Narendra Modi had appealed to the farmers to use less chemical fertilisers. “Today natural farming is also the path towards self-reliance…. Natural farming, chemical-free farming can give strength to the country’s goal of becoming self-reliant,” Modi had stated.
Through PM-PRANAM, government is trying to kill two birds in one stone. First, the subsidy burden will ease following a reduction in use of chemical fertilisers. Second, by incentivizing the states, it will try to initiate a healthy competition between the states which wil help modernising our agricultural system. Most importantly, the ultimate benefiter will be the farmers.
