The Ministry of Finance will seek parliamentary approval for additional spending


NEW DELHI : The Ministry of Finance plans to seek parliamentary approval for additional spending on food and fertilizer subsidies in the winter session to cover the cost of free food grains for the population and to maintain fertilizer prices stable conditions for farmers in the context of soaring world prices for potash and natural gas.

The Ministry of Finance has approved a supplementary budget 82,000 crore of fertilizer subsidy to be spent this financial year, which will bring the total fertilizer subsidy to 1.91 trillion, a jump of 75% from the 1.09 trillion planned in the FY23 budget, said a person familiar with the development.

The Center has already announced two extensions of its free food grain program through December at a cost of almost 1.26 trillion. The person quoted above said that the additional grant is being used now and applications for additional grants will be made.

An email sent to the Department of Finance early Saturday seeking comment on the story went unanswered at press time.

Experts said the government would be able to meet the additional spending on the strength of revenues. “The Union budget for FY23 had assumed nominal gross domestic product (GDP) growth of 11.1% for 258 trillion this fiscal year. Our estimate is for nominal GDP to grow 17-18% this fiscal year, which could yield a little more $4 trillion in government revenue. The additional subsidy requirement is less than that,” said DK Srivastava, Chief Policy Advisor, EY India.

But spending more than the amounts originally planned and changing the heads under which the funds are used, which occurs when there are savings under certain plans and additional expenses under certain other plans, requires the approval by Parliament.

Soaring global commodity prices have led to soaring subsidy requirements. India depends on imports of potash, a key fertilizer. Additionally, the price of urea, another key fertilizer, depends on the cost of natural gas and its feedstock. Gas generally follows the price of crude oil.

After the Russian-Ukrainian war, energy prices rose, impacting the cost of producing fertilizers and steel. To control supply disruptions, fertilizer companies signed a three-year agreement in September with Canada’s Canpotex for the supply of 15 million tonnes of potash per year.

The government, in two tranches, extended the free food grain program, Pradhan Mantri Garib Kalyan Ann Yojana, first from April to September and then to December. The idea is to protect vulnerable sections of society during the festive season.

A trend that relieves political decision-makers is the dynamism of tax collections, both at the level of direct taxes and the GST. Sending a strong signal about the central government’s fiscal health, the Ministry of Finance last month lowered its FY23 borrowing target from 10,000 crore to 14.21 trillion.

Gross direct tax receipts through October 8 jumped 23.8% from a year ago for 8.98 trillion, while September figures showed GST revenue collection was higher than the $1.4 trillion for seven consecutive months.

The government has so far achieved about 37% of its Divestment target of 65,000 crores, which was lowered sharply from last year Target of 1.75 trillion, according to data available from the Ministry of Finance.

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