Context:
An editorial argues for rationalising food and fertiliser subsidies to reduce fiscal burden, improve efficiency, and correct distortions in agricultural production and environmental sustainability.
Key Highlights:
Economic Background
• India’s GDP projected to grow at 7.4% in FY26.
• Consumer inflation declined to 1.3% (December 2025).
• Agri-GDP growth expected at 3.1% in FY26, down from 4.6% in FY25 due to falling food prices.
Subsidy Burden
• Food subsidy likely to reach ₹2.25 trillion.
• Fertiliser subsidy may rise to ₹2 trillion.
• Around 56% of the population receives free food under PM Garib Kalyan Yojana (PMGKY).
• Extreme poverty estimated at 5.3% (2022).
Structural Issues Identified
• Subsidies incentivise water- and fertiliser-intensive crops like rice, wheat, sugarcane.
• FCI economic cost:
- Rice: ~₹42/kg
- Wheat: ~₹30/kg
• Excessive urea subsidy leads to nutrient imbalance, groundwater contamination, and higher GHG emissions.
Reform Suggestions
- Food Subsidy Reforms
- Scale down free food coverage from 56% to more targeted beneficiaries.
- Introduce Direct Benefit Transfers (DBT) to producers/beneficiaries.
- Convert Fair Price Shops (FPS) into nutrition hubs offering pulses, oilseeds, milk, eggs, fruits, vegetables.
- Fertiliser Reforms
- Bring urea under Nutrient-Based Subsidy (NBS) scheme.
- Shift fertiliser subsidy administration to Ministry of Agriculture & Farmers’ Welfare (MoAFW).
- Promote balanced fertilisation and soil health.
Stakeholders Involved
• Ministry of Finance
• Ministry of Consumer Affairs (Food & PDS)
• Ministry of Agriculture & Farmers’ Welfare
• Farmers, FCI, PDS beneficiaries
Significance / Concerns
• Large subsidies strain fiscal consolidation efforts.
• Distorted cropping patterns aggravate water stress and environmental degradation.
• Reform politically sensitive due to food security concerns.
Relevant Prelims Points:
- Food Subsidy
- Difference between economic cost incurred by FCI and price charged under Public Distribution System (PDS).
- Nutrient-Based Subsidy (NBS) Scheme
- Fertilisers subsidised based on nutrient content (N, P, K, S).
- Currently excludes urea.
- Minimum Support Price (MSP)
- Government-announced price to procure crops.
- PM Garib Kalyan Yojana (Food Component)
- Provides free food grains under NFSA framework.
Relevant Mains Points:
- Economy (GS 3)
- Subsidy rationalisation and fiscal consolidation.
- Need to balance food security with efficiency.
- Agricultural Reforms
- Addressing crop diversification and sustainable agriculture.
- Correcting price signals to reduce overproduction of cereals.
- Environmental Sustainability
- Reducing nitrogen overuse and GHG emissions.
- Aligning subsidies with climate commitments.
- Governance (GS 2)
- DBT as tool for reducing leakage.
- Targeted welfare vs universal provisioning debate.
- Way Forward
- Gradual and calibrated reduction in coverage.
- Promote crop diversification (millets, pulses, oilseeds).
- Strengthen soil health card-based nutrient management.
- Transparent communication to ensure political acceptability.
UPSC Relevance:
GS 3 – Economy (Subsidies, Agriculture, Fiscal Policy)
GS 2 – Governance & Welfare Schemes
Prelims – NBS, MSP, PDS, FCI