India’s Food Subsidy Bill May Rise by Over 10% As Grain Stocks Pile Up

The government’s food subsidy budget for FY26 is likely to increase by 10–15% from the budget estimate of ₹2.03 lakh crore. The rise is mainly due to a higher inventory of grain stocks. Besides, the growing cost of distributing free food grains under government schemes like PMGKAY is also driving this growth. 

The new procurement season for paddy has already begun this month, adding to existing stock levels. The Food Corporation of India (FCI), which handles over 70% of food subsidies, has revised its estimated expenditure for FY26 from ₹1.4 lakh crore to ₹1.7 lakh crore. 

Why is FCI Borrowing Despite Receiving Subsidies Timely? 

As of now, FCI has received ₹75,921 crore (about 53% of its annual subsidy allocation) from the finance ministry. Additionally, it has been given a ₹50,000 crore wage and means advance, which must be repaid by March 2026. Despite this, the corporation has taken a short-term loan of ₹25,880 crore this year due to high operational costs.

The main reason for this pressure is the surplus grain stock. FCI currently holds 66.53 million tonnes (MT) of rice and wheat, far above the required buffer of 30.77 MT for October. This excludes another 9 MT of rice pending from millers. The new paddy procurement season will likely add to this surplus.

Storage and Distribution Costs Rise by Over ₹1/Kg

The FCI’s economic cost for grains continues to climb. For FY26, the estimated cost is ₹41.73 per kg for rice and ₹29.80 per kg for wheat, compared to ₹40.42 and ₹28.50 in FY25. These costs include the minimum support price (MSP), transportation, and storage expenses.

If the excess stocks are not liquidated through open market sales or other means, the government may face challenges in storing and maintaining them. So far in FY26, FCI has sold a record 5.63 MT of rice at subsidised rates through various schemes, including open market sales, ethanol production, and the Bharat Rice initiative.

Free Ration Schemes Like PMGKAY Add to Fiscal Burden

Under PMGKAY, every eligible person receives 5 kg of free grains each month. The scheme, extended until 2028, will cost the government an estimated ₹11.8 trillion. However, with annual grain procurement exceeding distribution needs, the surplus continues to inflate costs.

Read more: GST 2.0: Small, Daily Use FMCG Items Like Biscuits and Shampoos to Get Bigger by Mid-November.

Conclusion

India’s food subsidy bill is set to rise sharply as higher procurement and storage costs weigh on government finances. Unless the surplus grain stocks are reduced through sales or alternative use, the financial burden on the exchequer is expected to keep growing in the coming years.

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