Context:
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Parliament’s approval of Supplementary Demands for Grants reflects the government’s need to meet unforeseen or additional expenditures during the financial year.
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In 2025–26, the Rajya Sabha cleared extra allocations including major support for fertilizer subsidies and compensation to oil marketing companies, underlining the fiscal burden of welfare and price-stabilisation measures.
Key Highlights:
Supplementary Grants Approval
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The Rajya Sabha approved the first batch of Supplementary Demands for Grants, authorising an additional expenditure of ₹41,455 crore for 2025–26.
Major Allocation: Fertilizer Subsidy
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Over ₹18,000 crore has been allocated for fertilizer subsidy.
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Fertilizer support remains crucial for:
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Affordable farm inputs
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Sustaining agricultural productivity
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Ensuring food security
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Overall Fiscal Adjustment
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The gross additional expenditure is ₹1.32 lakh crore, which will be partly offset by savings of ₹90,812.17 crore from various ministries.
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This highlights ongoing fiscal balancing between new demands and expenditure rationalisation.
Petroleum Compensation
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₹9,500 crore was allocated to the Petroleum Ministry to compensate oil marketing companies (OMCs).
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Such compensation addresses under-recoveries, when retail fuel prices remain below supply costs.
Other Sectoral Support
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₹1,304 crore allocation for the Department of Higher Education is expected to support infrastructure and institutional development initiatives.
Significance / Concerns
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Rising subsidy requirements indicate:
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Pressure on government finances
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Continued dependence on input subsidies
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Need for reforms toward efficient and targeted support
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Relevant Prelims Points:
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Supplementary Demands for Grants are used when government expenditure exceeds the amounts approved in the Union Budget.
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Fertilizer subsidies reduce input costs for farmers and support foodgrain production.
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Under-recoveries refer to losses faced by OMCs when fuel is sold below cost.
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Parliamentary approval is mandatory for additional expenditure beyond budgeted limits.
Benefits + Challenges + Impact
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Benefits: Protects farmers from rising fertilizer prices; stabilises fuel retail pricing.
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Challenges: Large subsidy bills strain fiscal discipline; may distort market pricing.
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Impact: Supports agriculture and consumers but increases pressure on public finances.
Relevant Mains Points:
Governance and Public Finance Dimensions
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Supplementary grants reflect the flexibility required in fiscal governance to respond to:
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Price shocks
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Subsidy burdens
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Unexpected sectoral needs
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Economic Implications of Subsidies
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Fertilizer subsidies ensure affordability but raise concerns about:
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Inefficient usage
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Over-application harming soil health
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Leakage and unequal distribution
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Energy Sector Concerns
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Compensation to OMCs indicates continued government role in fuel price management.
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Persistent under-recoveries can affect:
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Fiscal stability
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Investment capacity of OMCs
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Way Forward
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Move toward direct benefit transfer (DBT) and nutrient-based subsidy reforms.
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Ensure better targeting of fertilizer support to small and marginal farmers.
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Strengthen fiscal transparency in subsidy accounting.
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Adopt long-term pricing reforms in petroleum sector to reduce ad-hoc compensation.
UPSC Relevance (GS-wise):
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GS 3 (Economy): Subsidies, fiscal management, agriculture input support
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GS 2 (Governance): Parliamentary financial control, supplementary grants mechanism
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Prelims: Budgetary procedures, under-recoveries, subsidy concepts