STATES
Subsidies account for 8% of States’ revenue expenditure; energy, farm top spending
- IBJ Bureau
- Jan 05, 2026
State governments continue to devote a sizeable share of their budgets to subsidies, underscoring their role in welfare delivery, while intensifying pressure on public finances. Support directed largely to power and agriculture sectors remains a major component of States’ revenue expenditure, raising concerns about fiscal sustainability and limited headroom available for capital investment.
In 2023-24, States spent about Rs 3.30 lakh crore on subsidies, making them one of the largest items within revenue expenditure. Energy utilities- and agriculture-related activities were the principal beneficiaries, together accounting for nearly 73 per cent of total subsidies disbursed by States, according to data from the Comptroller and Auditor General of India (CAG).
Energy subsidies emerged as the single-largest component, amounting to Rs 1.45 lakh crore during the year. A decadal analysis from 2014-15 to 2023-24 shows that subsidy spending has in most years hovered around 8 per cent of the combined revenue expenditure of all States.
Energy subsidies, largely in the form of free or concessional electricity for farmers and households, absorbed close to half of the total subsidy outgo. These measures reflect States’ efforts to cushion consumers against high tariffs and volatile fuel prices. Agriculture and allied activities formed the second-largest category, driven by spending on fertilisers, irrigation, seeds and other farm inputs, the CAG data shows.
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