NEW DELHI: Karnataka, Madhya Pradesh, Tamil Nadu, and Punjab have emerged as the biggest dispensers of subsidies, with these payments accounting for over 13.5% of their total expenditure in 2024-25, according to the latest Comptroller and Auditor General (CAG) report on state finances.
Subsidy Spending Nearly Triples in a Decade
Subsidy spending by states has nearly tripled over the past decade, reaching almost Rs 4.4 lakh crore in 2024-25. In absolute terms, subsidies offered by 28 states jumped threefold compared to Rs 1.4 lakh crore in 2015-16, while their total expenditure rose 2.3 times during the same period.
Proportion of Revenue and GDP
As a proportion of revenue spending, subsidies increased from 1.1% to 1.4%. Similarly, as a share of state GDP, it rose to 10.2% in FY25, compared to 7.7% in FY16. The numbers indicate that in FY25, as more states, irrespective of political affiliation, handed out direct cash transfers, the share of subsidies in revenue expenditure entered double digits for the first time. However, the CAG report is silent on cash transfers, which have become a popular electoral promise with parties offering direct fund transfers to women, farmers, and other groups.
Sectoral Breakdown: Energy and Agriculture Dominate
The federal auditor's data showed that energy—largely power subsidies—accounted for 43% of subsidy payments in FY25, followed by 30% for agriculture, comprising price support, arrear waivers, fertiliser, and seeds.
Top States in Power Subsidies
Rajasthan offered the highest subsidy for power, both in absolute and percentage terms, followed by Karnataka. Maharashtra, Tamil Nadu, Karnataka, Madhya Pradesh, and Rajasthan together accounted for Rs 2.3 lakh crore, or 54% of state subsidies.
Wide Variation Across States
Within states, there is a huge gap in subsidy outgo. Six states spent over 10% on subsidies, while an equal number spent under 1%. Six northeastern states—Arunachal Pradesh, Sikkim, Nagaland, Meghalaya, Tripura, and Assam—had subsidies below 1% of their total expenditure. Meanwhile, states like Kerala, Mizoram, Uttarakhand, and Manipur spent under 2% on subsidies.
The CAG report attributes the relatively low subsidy levels in these states to smaller consumer bases, limited industrial and irrigation activity. In these states, subsidies are primarily directed towards transport, food, and social-sector support rather than energy or agriculture.
