★ There are several key reasons behind the increase in food subsidy in the Revised Estimates for FY26. Compared to the Budget Estimates, food subsidy has been raised by around ₹25,000 crore this year, making it one of the sharpest increases since 2023–24.

While the increase appears to be linked to the rising economic cost of wheat and rice and the continuation of free distribution under the Pradhan Mantri Garib Kalyan Anna Yojana, sources indicate another important factor. The government has accepted the demand of the Food Corporation of India (FCI) to provide Budget support for the sale of subsidised rice under the Open Market Sale Scheme (OMSS) and for the costs related to the ethanol blending programme, instead of forcing the corporation to manage these expenses through borrowing.

★ In FY26, the economic cost of rice was about ₹41.73 per kg, while the reserve price under OMSS was around ₹28 per kg. This gap resulted in a subsidy burden of roughly ₹10,000 crore. In addition, the government allocated around 5.2 million tonnes of damaged and broken rice for use in the ethanol blending programme at a price of about ₹23.50 per kg, which also involved significant subsidy support.

★ Taken together, subsidies under these two heads amounted to nearly ₹25,000 crore. This move will significantly reduce the financial pressure on FCI and limit its need to borrow at high interest rates. Overall, the increase in food subsidy in FY26 reflects not just free grain distribution, but a conscious effort to transparently account for the real costs of OMSS operations and the ethanol blending programme within the Budget itself.