A farmer sprays fertiliser on his field in Vemulapally village near Miryalguda, Nalgonda District. File
| Photo Credit: Nagara Gopal

The Centre has decreased fertiliser subsidies, apparently hoping that the improving situation in Ukraine and increased domestic production will help in managing the situation. The Fertilisers and Chemicals Ministry has been claiming that the increase in domestic production of essential fertilisers such as urea will result in decreasing fertiliser subsidies.

Allocation for the Fertilisers Department in this Budget is ₹1,64,150.81 crore. It was ₹1,75,148.48 crore in the last Budget. In the Revised Estimates of the last financial year, it was ₹1,88,947.29 crore. The amount actually used in 2022-23 was ₹2,51,369.18 crore, with payments for indigenous and imported urea estimated to have accounted for the bulk of the expenditure.

Budget 2024 updates

Union Finance Minister Nirmala Sitharaman announced in the Budget that after the successful adoption of Nano Urea, application of Nano Di Ammonium Phosphate (Nano DAP) on various crops will be expanded to all agro-climatic zones. She said the pandemic had led to a crisis of food, fertiliser, fuel and finances for the world, while India successfully navigated its way. “The country showed the way forward and built consensus on solutions for those global problems,” she said.

Welcoming the budgetary allocation, Union Fertilisers Minister Mansukh Mandaviya said the Narendra Modi government is revolutionising the face of Indian agriculture. “The expansion of the application of Nano DAP on various crops, announced in the Budget will encourage sustainable farming. It will also help in making India Aatmanirbhar [self-reliant] in fertilisers,” he said thanking the Finance Minister for the expansion of the application of Nano DAP on various crops.

Also read: Interim Budget 2024 | Net zero gain for MGNREGS

Food subsidy sees increase

Food subsidy has seen an increase in the allocation compared to the last year. The total food subsidy includes ₹2,05,250 crore for the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) and ₹1 lakh crore for the Sugar Subsidy payable under Public Distribution System. In the last Budget, the amount was 1,97,350 crore, while in 2022-23, the actual expenditure was ₹2,72,802.38 crore.

Ms. Sitharaman said the worries about food have been eliminated through free ration for 80 crore people. “Minimum support prices for the produce of ‘Annadata’ [food providers or farmers] are periodically increased appropriately. These and the provision of basic necessities have enhanced real income in the rural areas. Their economic needs could be addressed, thus spurring growth and generating jobs,” she said.

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A farmer spreads fertiliser on his field in Satara district, Maharastra. File
| Photo Credit: Reuters

India may earmark about $48 billion for food and fertiliser subsidies for the next fiscal year, two government sources said, indicating fiscal caution ahead of this year’s general election.

Food and fertiliser subsidies account for about one-ninth of India’s total budget spending of over ₹45 trillion during the current fiscal year that ends on March 31.

The Ministry of Consumer Affairs, Food and Public Distribution has estimated next year’s food subsidy bill at $26.52 billion, the two sources said. That is 10% higher than a projected outlay of nearly $24.11 billion for the current 2023-24 fiscal year.

Additionally, next fiscal year’s fertiliser subsidy is expected to be $21.10 billion, down from the current 2022-23 fiscal year estimate of nearly ₹2 trillion, one of the sources said. The sources, which are directly involved in the decision making on the subsidies, did not wish to be named as they were not authorised to speak to the media.

Finance Minister Nirmala Sitharaman will unveil the Union Budget 2024-25 on February 1.

The Ministry of Finance, the Ministry of Chemicals and Fertilizers and the Ministry of Consumer Affairs, Food and Public Distribution and the Ministry of Finance did not reply to requests for comment.

Maintaining the combined subsidies at their current level would be unusual for a government facing a general election in just a few months, but Prime Minister Narendra Modi is widely expected to win a third term in elections scheduled for April and May. Also, containing food and fertiliser subsidies is crucial for managing India’s fiscal deficit, which Mr. Modi’s Government is targeting at 5.9% of gross domestic product this year and planning to lower by at least 50 basis points in the fiscal year 2024-25.

The food subsidy bill is likely to go up next year as the Centre late last year extended its flagship free food welfare programme for the next five years. India runs its multi-billion dollar food welfare programme, the world’s biggest such initiative, by buying rice and wheat from millions of domestic farmers at state-set minimum or guaranteed prices and then supplying the staples for free to 800 million Indians.

A farmer spreads fertilizer in a field, at a village in Madurai.
| Photo Credit: PTI

Globally, there is a twin crisis in agriculture: in food and in fertilizers. On the one hand, there are fears of a fall in the global production and availability of food. The rise in food inflation has been an area of serious concern for the government and the Reserve Bank of India. On the other, global fertilizer prices have risen by about 200% over the past two years. Consequently, the prices of fertilizers and other farm chemicals in India have also shot up.

Domestically, the Union government has the unenviable task of explaining why it failed to double the real incomes of farmers between 2015 and 2022. Official data show that real incomes from cultivation have fallen in absolute terms after 2015. Between 2020-21 and 2022-23, annual growth rates in agriculture and allied sectors have been stagnant between 3% and 3.5%. Agricultural exports have risen, but the impact of this has been insignificant outside a handful of commodities.

Thus, the objectives of the Budget could be formulated as two-fold: one, it must have protected farmers and consumers from the food and fertilizer crises; and two, it must have taken steps to raise net incomes from cultivation.

Disappointing allocations

It was widely expected that food and fertilizer subsidies would be retained or increased. The restructuring of the food distribution guidelines, which effectively ended a part of the free supply of food grains under the Pradhan Mantri Garib Kalyan Anna Yojana, was a disappointment even prior to the Budget. The Budget has reaffirmed that stance and cut food subsidy from ₹2.87 lakh crore in 2022-23 (RE) to ₹1.97 lakh crore in 2023-24 (BE). Fertilizer subsidies have also been cut from ₹2.25 lakh crore to ₹1.75 lakh crore. In effect, these cuts will expose farmers to the vagaries of the global market and render the economics of agriculture more fragile. Landless households in rural areas are also likely to be affected adversely, as the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme has been cut from ₹73,000 crore in 2022-23 (BE) to ₹60,000 crore in 2023-24 (BE).

The cut in fertilizer subsidies will increase the costs of cultivation for farmers, but there is no amelioration to be expected from a compensatory rise in output prices. The rise in minimum support prices between 2020-21 and 2021-22 just covered for the rise in input costs and did not leave any space for higher net incomes.

Editorial | A raft of concessions amid consolidation: On Budget 2023-24

There has been no solace on the production front too. Yields in agriculture remain low. Rising fertilizer prices have led to lower consumption of fertilizers in farms, leading to imbalanced nutrient application and even poorer prospects of yield rise. The government, on the other hand, has been promoting variants of “natural farming”. The Budget has even allocated ₹459 crore to a new National Mission on Natural Farming. But natural farming has no scientific validation and is likely to reduce crop yields by 25-30%. If yields fall, how can farming stay viable in the face of rising input prices and stagnant output prices?

Capital expenditure

Amidst all the talk of raising capital expenditure, agriculture presents us with a story of utter neglect. Capital investment is required in agriculture not just for irrigation but also to build/improve agricultural markets (mandis). The total capex of the government in 2022-23 was ₹7.5 lakh crore, but allocation under the capital accounts of crop husbandry, animal husbandry, dairy and fisheries was just ₹119 crore. In 2023-24, this is expected to fall to ₹84.3 crore. Under the capital account of irrigation and flood control, the budgeted allocation in 2022-23 was only ₹350 crore, which is slated to fall to ₹325 crore in 2023-24. The Agriculture Infrastructure Fund (AIF) is another much-touted scheme. The budgeted allocation for AIF in 2022-23 was ₹500 crore, of which only ₹150 crore was spent. In 2023-24, the allocation of ₹500 crore has been retained.

The Finance Minister made a series of other announcements on agriculture in her speech, but the allocations for these schemes or scheme components are not listed in the Budget documents. Essentially, all these are fragmented allocations thinly spread across diverse departments with only an indirect or marginal impact on the agricultural sector. Good examples are the Agriculture Accelerator Fund, PM-Pranam, GOBARdhan, Bhartiya Prakritik Kheti Bio-Input Resource Centres, Mishti, and Amrit Dharohar. There was much time spent in the speech on millets too, but without any explicit allocation other than in upgrading a Centre for Excellence in Hyderabad. There was yet another announcement on a targeted investment of ₹6,000 crore under the Pradhan Mantri Matsya Sampada Yojana, but the actual increase in allocation in the Budget papers is only ₹ 121 crore.

The Budget fails to address the most pressing problems in Indian agriculture. The lack of a scientific and grounded vision, which must have ideally driven the quantum and direction of allocations, is telling.

R. Ramakumar is Professor at the Tata Institute of Social Sciences, Mumbai

Finance Minister Nirmala Sitharaman on Wednesday, February 1, presented the last full budget of the Narendra Modi government before the 2024 general elections. The Minister announced a range of new initiatives, revised income tax slabs and customs duty, and sops for agriculture and energy transition.

The Union Budget 2023-24 document also listed the new allocations for core welfare schemes that drive socio-economic development. Here’s a roundup of how the budgetary allocations for some of the key schemes have changed-

MGNREGS: The government slashed the budget for its flagship rural employment scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) by nearly 32% compared to the ₹89,400 revised estimate for the scheme in the current year.

Also read | Explained | The funding and demand for MGNREGA

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was passed in 2005 and aimed at enhancing the livelihood security of households in rural areas. Under it, the MGNREGS is a demand-driven scheme that guarantees 100 days of unskilled work per year for every rural household that wants it, covering all districts in the country except those with a 100% urban population.

Food Subsidies: The Centre has allocated a little above ₹2 lakh crore for the food subsidy under the National Food Security Act (NFSA)- this includes funds for the Food Corporation of India, funds for decentralised procurement of grains by State agencies, and other logistical costs. Starting from January 1, 2023, the Centre had decided to provide 5 kg of free foodgrains per month to the 81.35 crore beneficiaries of the NFSA for one year starting from January 2023, rather than charging them a subsidised amount of ₹3 a kg of rice, ₹2 a kg of wheat and ₹1 a kg of coarse cereal as is usually done.

It was announced in December that the government was terminating the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which had provided an additional 5 kg of free grains every month to NFSA beneficiaries after being launched as an emergency measure in response to the COVID-19 pandemic in April 2020 and received multiple extensions since. In a normal year, without COVID disruptions, the Centre’s food subsidy bill on account of the NFSA amounted to around ₹2 lakh crore, similar to the newly-announced allocation, but the PMGKAY had effectively doubled that sum for the past two years.

Jal Jeevan Mission: The Centre increased its budgetary allocation for the Jal Jeevan Mission (JJM) or the National Rural Drinking Water Mission by about 27% to ₹70,000 crore from the current year’s revised estimates of ₹55,000. The Jal Jeevan Mission aims to provide safe and adequate drinking water through individual household tap connections by 2024 to all households in rural India.

The Jal Shakti Ministry tweeted last week that the government had provided 11 crore rural households with a tap water connection under the JJM scheme. Data from the Ministry’s dashboard suggest that 56% of the targeted 19.3 crore households had been covered.

The scheme has a total financial outlay of about ₹3.60 lakh crore, with the Centre funding 50% of the cost with States and Union Territories, except for Union Territories without a legislature, where it foots the entire bill, and northeastern and Himalayan States and Union Territories with legislatures, where it funds 90% of the bill.

Ayushman Bharat-PMJAY: The budget for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) — the national public health insurance fund, saw an increase of about 12% at ₹7,200 crore compared to the ₹6,000 crore revised estimates for the current year.

The Ayushman Bharat PM-JAY is a health insurance scheme launched in 2018, aiming to provide a health cover of Rs. 5 lakh per family per year for secondary and tertiary care hospitalization. It aims to over 10.74 crore poor and vulnerable families (or 50 crore beneficiaries) from the bottom 40% of the Indian population. Union Health Minister Mansukh Mandaviya had said in December 2022, that 4.5 crore people had so far been empanelled under the scheme.

PM-Kisan: The allocation for the Prime Minister’s Kisan Samman Nidhi (PM-KISAN) scheme was the lowest in five years and remained the same as the revised estimates for the current year at ₹60,000 crore. PM-Kisan is a flagship Central scheme launched in 2019 for cash transfers ₹6,000 per year to eligible farmer families in three instalments of ₹2,000 each.

Finance Minister Nirmala Sitharaman informed while presenting the Union Budget on Wednesday that the government has made cash transfers totalling ₹2.2 lakh crore to around 11 crore farmers under the PM-Kisan scheme.

PM-POSHAN: The government has allocated a budget of ₹11,600 crore to the Pradhan Mantri Poshan Shakti Nirman, or the rebranded version of the mid-day meal scheme for 2023-24. This is down 9.37% from the current year’s revised estimates of ₹12,800.

In 2021, while renaming the mid-day meal scheme to give hot cooked meals to 11.8 crore government school students from Class 1 to 8, the Centre had also decided to extend the scheme to 24 lakh children studying in balvatikas, the pre-primary section of government schools from 2022-23.

National Education Mission: A total of ₹38,965 crore was allocated to the National Education Mission for 2023-24, up 19.44% from the ₹32,612 crore revised estimates for the current year. The Mission is the umbrella scheme integrating major education-related schemes so education can be provided holistically and without segmentation from pre-primary to class 12. It includes the Sarva Shiksha Abhiyan under the Right to Education and schemes for secondary and higher education as well those for teacher training and adult education.

PMAY: The Centre allocated ₹79,590 crore to the Pradhan Mantri Awas Yojana (PMAY), up 3.19% from the current year’s revised estimates and 66% from the budget estimates. The PMAY aims at constructing houses in both urban and rural areas. PMAY-Gramin (rural) was initiated in November 2016 with a target of completing 2.7 crore houses and PMAY-Urban was initiated in June 2015 with a target of constructing 1.2 crore homes.

National Social Assistance Program: The budget allotted ₹9,636 to the National Social Assistance Program (NSAP), which provides monthly pension assistance to the elderly, widows, and persons with disabilities.

Development of Scheduled Tribes and Scheduled Castes: The budget allocated ₹4,295 crore and ₹9,409 crore to the umbrella programs for the development of Scheduled Tribe and Scheduled Caste communities respectively. While the ST development allocation saw a nearly 10% increase, the SC programme funding rose by close to 22%, compared to the current year’s revised estimates.

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