The government's strategy to control food subsidy costs revolves around a combination of measures, including the Open Market Sale Scheme (OMSS) and increased sales of surplus rice. Here's a summary of how these efforts are expected to impact the food subsidy in the coming years:
Food Subsidy Control via OMSS: Despite rising Minimum Support Prices (MSP) for wheat and paddy, the government aims to keep the food subsidy bill in check. This will be achieved by selling wheat and rice through the Open Market Sale Scheme (OMSS), which helps reduce the burden on the National Food Security Act (NFSA).
MSP Adjustments: The MSP for wheat has been raised by Rs 150 to Rs 2,425 per quintal, but even with these increases, the government expects food subsidy expenditures to grow only slightly. For FY 2025-26, food subsidy expenditure is estimated at Rs 2.03 lakh crore, just 3% higher than the previous fiscal year.
Surplus Stock Utilization: To further control the subsidy, the government is focusing on selling the surplus rice stock. In 2024-25, food subsidy was originally estimated at Rs 2.05 lakh crore but was later revised to Rs 1.97 lakh crore, thanks to the sale of surplus wheat and rice through OMSS.
Export Growth: The export of agricultural and processed food products has seen an 11% increase in 2024, reaching $17.77 billion, which reflects a healthy demand in international markets. This boosts the government's confidence in managing surplus stocks.
Incentives for Ethanol Manufacturers: In an effort to clear surplus stocks, the government has allowed ethanol manufacturers to buy rice at a subsidized rate of Rs 2,250 per quintal. Additionally, state governments and corporations can purchase up to 12 lakh tonnes of rice from the central pool.
These strategies, alongside the consistent increase in MSPs, aim to balance the rising cost pressures while ensuring food security and controlling the subsidy burden.