To complete reform drive, rationalise food and fertiliser subsidies, Pg12

Key Highlights:

• India's economy is projected to grow at 7.4% in FY26, with consumer inflation down to 1.3% in December 2025.
• Agri-GDP growth is expected to be only 3.1% in FY26, a drop from 4.6% in FY25, due to collapsing food prices.
• The food subsidy is likely to reach Rs 2.25 trillion, and the fertiliser subsidy may rise to Rs 2 trillion in the Union Budget.
• 56% of the population receives free food under the PM Garib Kalyan Yojana, while extreme poverty was at 5.3% in 2022.

Detailed Insights:

• Current agricultural policies favor water and fertilizer-intensive crops like rice, sugarcane, and wheat due to massive subsidies on power and fertilizers.
• The Food Corporation of India (FCI) incurs an economic cost of around Rs 42/kg for rice and Rs 30/kg for wheat.
• Scaling down the coverage of free food distribution from 56% to a lower percentage and direct cash transfers to producers can reform the food subsidy system.
• Converting fair price shops (FPS) into nutrition hubs with diversified food options like pulses, oilseeds, milk, eggs, fruits, and vegetables is suggested.
• Excessive urea subsidy leads to imbalanced fertilizer use, contaminating groundwater and increasing greenhouse gas (GHG) emissions.
• Bringing urea under the Nutrient-Based Subsidy (NBS) scheme and shifting the fertilizer subsidy to the Ministry of Agriculture and Farmers’ Welfare (MoAFW) are potential reforms.

Key Concepts Involved:

• Food Subsidy: The difference between the economic cost incurred by FCI and the revenue generated from PDS beneficiaries.
• Nutrient-Based Subsidy (NBS): A subsidy scheme where fertilizers are subsidized based on their nutrient content.
• Minimum Support Price (MSP): The minimum price set by the government to purchase certain crops from farmers.