Subsidy may top budget estimates by nearly 50%

Outgo on fertilisers may increase by over ₹1 lakh crore

- PRASANTA SAHU & SANDIP DAS

THE GOVERNMENT’S SUBSIDY spend on fertilisers, food and LPG may overshoot the budget estimates by a massive ₹2 lakh crore or nearly 50%, unless the Hormuz disruptions are resolved without further delay, according to an internal analysis by the finance ministry.

This estimate considers that even after the US and Iran reach a deal, it may take a few months for the flow of cargo through the key waterway to fully normalise.

According to officials aware of the matter, if global LNG and fertiliser prices remain elevated due to supply constraints through the current fiscal year, the fertiliser subsidy could exceed the respective BE by ₹1.71 lakh crore by as much as ₹1-1.3 lakh crore. Similarly, they said, another ₹50,000 crore may be required to compensate state-owned oil marketing companies (OMCs) for the subsidies under the Ujjwala scheme and to offset the losses arising from government-controlled prices for other domestic LPG consumers. CURRENTLY, A 14.2-KG domestic LPG cylinder is priced at ₹913, while beneficiaries of the PMUY (Pradhan Mantri Ujjwala Yojana) receive it at a subsidised rate of ₹613. OMCs are incurring under-recoveries of around ₹674 per cylinder on domestic LPG sales.