As per the Budget Estimates of expenditure on major subsidies during 2019–20, the maximum expenditure was likely to be on
- (a)urea subsidy
- (b)petroleum subsidy
- (c)food subsidy
- (d)fertilizer subsidy
Correct — C, food subsidy. In the Budget Estimates for 2019-20 the food subsidy was Rs 1,84,220 crore, out of a total major-subsidy bill of Rs 3,38,949 crore. Fertiliser came next at Rs 79,996 crore, then petroleum at Rs 37,478 crore and other subsidies at Rs 37,255 crore. Food was therefore larger than all the rest put together, and more than twice the fertiliser allocation. The reason is structural rather than accidental: the food subsidy pays for the gap between what the Food Corporation of India spends on procuring, storing and moving grain at the minimum support price and the Rs 3, Rs 2 and Re 1 a kilogram at which that grain is issued to about eighty crore people under the National Food Security Act.
- (a)urea subsidy — Urea is only one component of the fertiliser subsidy, the other being the nutrient-based subsidy on phosphatic and potassic fertilisers. A part of Rs 79,996 crore cannot exceed the Rs 1,84,220 crore food subsidy.
- (b)petroleum subsidy — The smallest of the three named subsidies at Rs 37,478 crore, made up mainly of the liquefied petroleum gas subsidy of about Rs 32,989 crore and a kerosene subsidy of about Rs 4,489 crore.
- (d)fertilizer subsidy — The second largest at Rs 79,996 crore, but less than half the food subsidy. It is the tempting answer because fertiliser subsidy is discussed constantly in agricultural policy.
The Union Budget separates a handful of major subsidies — food, fertiliser and petroleum — from the residual head of other subsidies, which covers interest subvention and price support operations. A subsidy of this kind is the difference between an economic cost and an administered price, borne by the exchequer. Food and fertiliser are both delivered as cheaper goods rather than as cash, which is why they are called indirect or input subsidies, and both flow through public agencies rather than to the beneficiary's bank account.
The trap here is the pairing of urea with fertiliser in the same option list. A candidate who knows that urea absorbs the largest single share of fertiliser support may reach for option (a) without noticing that urea is a subset of option (d), and that a subset cannot be bigger than the set it sits in. Once you see the nesting, only food and fertiliser are real contenders, and food wins by a wide margin. Present-day position: the ordering has held, but the sums have not. Free grain distribution during the COVID-19 pandemic pushed the food subsidy far above this level for two years before it settled again, and fertiliser subsidy rose sharply in 2021-22 and 2022-23 when global prices of urea and phosphates spiked. Quote the 2019-20 figures only for 2019-20.
- Budget Estimates 2019-20: food subsidy Rs 1,84,220 crore, fertiliser Rs 79,996 crore, petroleum Rs 37,478 crore, other subsidies Rs 37,255 crore.
- The total major-subsidy bill for 2019-20 was budgeted at Rs 3,38,949 crore.
- The petroleum subsidy consists mainly of an LPG subsidy of about Rs 32,989 crore and a kerosene subsidy of about Rs 4,489 crore.
- The urea subsidy is a component of the fertiliser subsidy, alongside the nutrient-based subsidy on phosphatic and potassic fertilisers.
- The food subsidy exists because grain procured at the minimum support price is issued at Rs 3, Rs 2 and Re 1 a kilogram under the National Food Security Act.
Urea sits inside the fertiliser row, which is why option (a) can be eliminated without knowing its exact figure.
- Choosing urea over fertiliser without noticing that urea is a part of the fertiliser subsidy.
- Overestimating the petroleum subsidy because it was very large before deregulation of diesel in 2014.
- Carrying the 2019-20 figures into a pandemic year — the food subsidy rose steeply in 2020-21 and 2021-22 with free grain distribution.
As a largest-subsidy or ranking item for a named Budget year, or as a matching item pairing a subsidy with the ministry that administers it.
Consider the following statements: 1. The Oil Pool Account of Government of India was dismantled with effect from 1-4-2002. 2. Subsidies on PDS kerosene and domestic LPG are borne by Consolidated Fund of India. 3. An expert committee headed by Dr. R.A. Mashelkar to formulate a national auto fuel policy recommended that Bharat Stage-II Emission Norms should be applied throughout the country by 1st April, 2005. Which of the statements given above is/are correct?
- (a) 1 and 2
- (b) 2 and 3
- (c) 1 and 3
- (d) 1, 2 and 3
Answer(a) 1 and 2
Traces where the petroleum subsidy line in the Budget came from. Once the Oil Pool Account was wound up in 2002, the subsidies on public distribution kerosene and domestic cooking gas became an explicit charge on the Consolidated Fund of India — which is the Rs 37,478 crore head this CDS item asks you to rank against food and fertiliser.
- practice — not a real PYQ
The urea subsidy in the Union Budget is a component of which one of the following major subsidies?
- (a)Food subsidy
- (b)Fertiliser subsidy
- (c)Petroleum subsidy
- (d)Interest subsidy
Answer(b) Fertiliser subsidy — the fertiliser head covers the urea subsidy together with the nutrient-based subsidy on phosphatic and potassic fertilisers.
- practice — not a real PYQ
The food subsidy borne by the Union Government arises essentially from which one of the following?
- (a)The gap between the economic cost of foodgrain and the central issue price
- (b)The interest paid on loans taken by farmers
- (c)The cost of importing edible oils and pulses
- (d)The transport cost of moving fertiliser to the States
Answer(a) The gap between the economic cost of foodgrain and the central issue price — procurement at the minimum support price plus storage and movement costs, against issue at Rs 3, Rs 2 and Re 1 a kilogram.