According to Business Today Television sources, the Modi government’s second Budget 3.0 may include a slightly higher subsidy allocation for food in FY26 compared to FY25, driven by rising food inflation and higher logistics costs. However, fertilizer subsidies are expected to remain stable, reflecting forecasted fertilizer price trends for 2025-2026.

In its post-election budget presented in July 2024, the government allocated Rs 205.25 billion for food subsidies, which was 3.34 percent less than the Revised Estimate (RE) for FY24. fertilizer subsidy was pegged at Rs 164 billion, 13.18% less than the ER, while fuel subsidy were estimated at Rs 11,925 crore, reflecting a decrease of 2.57%.

However, according to the latest data and sources, the combined food and fertilizer subsidy bills have exceeded their initial allocations. The revised estimate for FY25 is expected to be 10-12 percent higher than the original allocation of these grants.

The increase in food subsidy requirements is attributed to food security concerns, fueled by fears of worsening food inflation and rising minimum support prices (MSPs) for wheat and wheat rice

“Our food subsidy was reduced in the July budget due to the Open Market Sale Scheme,” an official said.

For fertilizer subsidies, the government initially allocated Rs 1.64 crore, but later added Rs 6,594 crore in December, taking the total to Rs 1.7 crore. The subsidy on cooking gas, fixed at Rs 11,925 crore, is expected to remain unchanged.

Managing these higher allocations will be a challenge for the finance ministry due to fiscal pressures. Increased subsidy spending could strain the fiscal deficit, reducing the scope of development spending. Sources suggest that the government can counter this by slightly reducing capital expenditure or increasing revenue collection.

The government had initially pegged the overall subsidy bill for FY25 at Rs 3.81 lakh crore, but is likely to revise it upwards in the next budget. A similar allocation is expected for FY26.