Rising cost of holding huge stockpiles of rice and wheat and increase in minimum support price (MSP) is likely to inflate the government’s food subsidy expenses by atleast Rs 20,000 crore from the budget estimate of Rs 2.27 lakh crore for FY27, sources said.
The higher subsidy requirement is on account of the rising costs of holding on to a huge stockpiles of rice, and increase of 7%-8% in minimum support price (MSP) of the relevant crops – rice and wheat and coarse grains– , and other costs such as transportation, storage and incidentals.
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Sources told FE against th budget estimate of Rs 2.27 lakh crore for FY27, actual outgo towards implementing Pradhan Mantri Garib Kalyana Anna Yojana (PMGKAY) or free ration scheme may exceed Rs 2.47 lakh crore, if the central pool grain stocks continues to mount.
Mounting Economic Costs
As per the revised estimates, the food subsidy expenditure was Rs 2.27 lakh crore in FY26.
The Food Corporation of India (FCI)’s economic cost (including MSP, storage, transportation and carrying cost) for rice and wheat for 2026-27 is estimated to increase Rs 43.91/kg and Rs 31.45/kg, from Rs 42.11/kg and Rs 29.68/kg respectively in 2025-26.
On May 1, the FCI’s grain stock was 77.27 million tonne (MT) — 38.95 MT of rice and 38.3 MT of wheat. The stocks are against the buffer of 21.04 MT for April 1. This grain stock excludes about 30 MT of rice receivable from millers. Annually the corporation supplies around 36 – 38 MT of rice and around 18-20 MT of wheat under PMGKAY.
In addition wheat procurement in the current season (2026-27) will continue till June, adding to grain stock.
The FCI, which accounts for over 70% of the government’s food subsidy outgo, has revised its projected FY27 expenditure to Rs 1.87 lakh crore, up from the revised estimate of Rs 1.53 lakh crore (95% of total subsidy estimate of Rs 1.61 lakh crore). The finance ministry has released Rs 14,532 crore to FCI and wage and means advance in FY27 so far.
For the last many years, annually the FCI supplies around 36-38 MT of rice and 18-20 MT of wheat under the free ration scheme to around 810 million people.
Open-Ended Procurement
The procurement under the MSP from the farmers has been in the range of 75 to 80 MT in the last many years leading to piling up of stocks.
Grains stocks are rising despite the FCI selling a record 10 MT of rice from the surplus stock in the market in FY26 while the wheat sold under open market sale scheme was only 0.6 MT. The food ministry has stated that a periodic annual increase in MSP of rice and wheat in the range of 3% to 7% and open-ended procurement of rice and wheat provided to farmers have led to surplus grain stocks.
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The food subsidy bill had skyrocketed in FY22-FY23 because of a scheme that doubled the subsidised food grains supplies initiated as COVID relief measure. In addition to 5 kg of grain per head free under PMGKAY and beneficiaries under the National Food Security Act were provided foodgrains at highly subsidised rates of Rs 3/kg and Rs 2/kg for rice and wheat, respectively.
The government has extended the free ration scheme for five years till end of 2028 which would cost the exchequer around Rs 11.8 trillion.
TOPICSFood and BeverageThis article was first uploaded on May seven, twenty twenty-six, at thirty-one minutes past nine in the night.