Subsidy bills slashed to cut borrowing

Centre's food, fertilizer and petroleum subsidy is projected to decline by more than 7% in FY25 to ₹3.81 trillion

- Gireesh Chandra Prasad & Puja Das

A cut in the food and fertilizer subsidy bill in FY25, along with tax revenue buoyancy, is set to help the Centre rein in borrowing, creating room for the private sector to step in with investments.

The Centre’s food, fertilizer and petroleum subsidy is projected to decline by over 7% in FY25 to ₹3.81 trillion, which officials attribute to a fall in global commodity prices.

The reduction in subsidy in the next fiscal is not as sharp as the massive 22% moderation seen in FY24, which came on the back of a high base in prices following the Ukraine war.

Experts said that given volatile geopolitical conditions, it remains to be seen exactly how prices behave in FY25.

The budget document showed that the Centre has allocated ₹1.64 trillion as the fertilizer subsidy in FY25, a 13% reduction from the revised estimates for the current financial year.

The food subsidy has also been lowered by over 3% to ₹two trillion, while the petroleum subsidy has been cut 2.6% for the next fiscal to ₹11,925 crore.