Ahead of food security Act, FCI forced to borrow from banks for daily operations

Written by Sandip Das | New Delhi | Updated: Oct 2 2013, 03:16am hrs
The Food Corporation of India (FCI), which is gearing up for the implementation of the National Food Security Act, has been forced to take loans from banks for running its operation due to outstanding dues from the finance ministry.

These dues are due to a gap between allocation under the food subsidy Bill annually and the actual cost of operations of procurement, storage and distribution of foodgrains by FCI.

Sources told FE that till date, the government owes more than Rs 32, 650 crore to FCI that has made the corporation go for short-term loans.

Sources said all outstandings to FCI by the finance ministry has been settled till 2011-12.

Due to accumulated dues of Rs 32,650 crore, the FCI paid more than Rs 6,000 towards interest payment on its loans last fiscal. These delays in settlement in dues from the finance ministry comes at a time when the FCI is required to take up bigger operations for the implementation of the food security legislation. The law, which aims to supply 62 million tonnes of highly subsidised rice, wheat and coarse cereals to about 84 crore of the population, is expected to cost around Rs 130 ,000 crore annually.

This fiscal, against budget estimates of the food subsidy component, the finance ministry has allocated Rs 73,500 crore to the FCI, which excludes operations in the decentralised states such as Madhya Pradesh, Chhattisgarh and Orissa.

Including operations in these decentralised states, the food subsidy Bill is estimated at Rs 87,740 crore as per budget estimates for 2013-14.

The food ministry official said out of the allocated food subsidy component, Rs 41,560 crore had been released to FCI besides the wage and means advance of Rs 10,000 crore till now.

Previous outstandings force us to go in for short-term credit and use cash credit limit from the banks for which we have to pay interest, a food ministry official said.

FCIs cost of operations has been rising sharply mainly due to storage expenses and the annual rise in the minimum support price (MSP) offered to farmers over the last five years.

The finance ministrys allocation of food subsidy is not enough for the FCI to meet its expenses. On September 1, the FCI had grain stocks close to 59 million tonnes against a strategic reserve and buffer stock norms of 21 mt. For meeting our expenses, we (FCI) seek bank credit on which we pay interest. Our borrowing costs go up significantly, a food ministry official said.