CAG Report: Subsidies Surge to 13.5% of Expenditure in Four States

Karnataka, Madhya Pradesh, Tamil Nadu and Punjab have emerged as the biggest dole givers, with subsidies accounting for over 13.5% of their total expenditure in 2024-25, Comptroller & Auditor General has said in its latest report on state finances. In absolute terms, subsidies offered by states have jumped threefold, with 28 of them spending nearly Rs 4.4 lakh crore in 2024-25, compared with 1.4 lakh crore in 2015-16. During this period, their total expenditure rose 2.3 times. As a proportion of revenue spending, subsidies increased from 1.1% to 1.4%, the report pointed out. Similarly, as a share of state GDP, it rose to 10.2% in FY 25, compared with 7.7% in FY16.

The numbers indicate that in FY25, as more and more states, irrespective of political affiliation, handed out direct cash transfers, the share of subsidies in revenue expenditure went into double digits for the first time. The CAG report is, however, silent on cash transfers, which have emerged as the go-to option in every assembly as well as general election, with parties promising direct fund transfers to women, farmers and other groups. The federal auditor's data showed that energy - largely power subsidies - accounted for 43% of the subsidy payments in FY25, followed by 30% for agriculture, comprising price support, arrear waivers, fertiliser and seeds. Rajasthan offered the highest subsidy for power - in absolute and percentage terms - followed by Karnataka. Maharashtra, Tamil Nadu, Karnataka, MP and Rajasthan accounted for Rs 2.3 lakh crore or 54% of the state subsidies. Six states spent over 10% on subsidies, while an equal number spent under 1%. Six states in the North-East - Arunachal Pradesh, Sikkim, Nagaland, Meghalaya, Tripura and Assam - were at less than 1% when it came to subsidies as a proportion of their expenditure. Kerala, Mizoram, Uttarakhand, Mizoram and Manipur spent under 2% on subsidies. "The relatively low subsidy levels in these states is attributable to smaller consumer bases, and limited ind-ustrial and irrigation activity. In these states, subsidies are primarily dir-ected towards transport, food, and social-sector support rather than en-ergy or agriculture," the report said.