The government has released close to half of the annual food subsidy allocation to Food Corporation of India (FCI) in the first quarter of the current fiscal itself. However, this is expected to provide only temporary relief to the corporation because of absence of special provisioning for settlement of huge outstanding dues from previous years.
Sources told FE the finance ministry has released Rs 49,000 crore under the food subsidy allocation in the first quarter of the current fiscal. FCI’s food subsidy budget for the current year is Rs 1.07 lakh crore. The ministry is likely to release the balance amount over the next couple of months.
Cumulatively, the finance ministry has already allocated more than 40% or close to Rs 65,000 crore from the overall food subsidy budget for the current fiscal of Rs 1.45 lakh crore to FCI and states which carry out decentralised procurement of food grains.
However, because of outstanding dues to the FCI crossing Rs 60,000 crore by the end of FY17, the corporation would still have to seek short-term loans from banks to finance its procurement, storage and distribution of food grains.
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“We expect to receive the entire food subsidy allocation for the current fiscal by September. With the exception of FY16, our expenses far exceeded the budgetary provisions under the food subsidy allocation over the last many years, so outstanding dues kept on mounting,” an official said.
While the FCI got Rs 45,000 crore from the National Small Savings Fund (NSSF) as loan in the previous fiscal under a five-year special arrangement, the finance ministry has not made any such provision for the current fiscal.
As per the arrangement, the FCI would have to return the NSSF loan through equal annual installment.
Meanwhile, FCI’s annual cash credit limit (CCL) of `54,495 crore sanctioned by a consortium of 67 banks has been reduced to Rs 9,000 crore following the NSSF loan.
Thus seeking fresh short-term loan remains the only option for the FCI. Not only an annual rise in the minimum support price (MSP) of rice and wheat pushes up expenses for the FCI, the corporation holding on to excess food grain stocks than required for targeted public distribution system and buffer norms also adds up to cost of operations.
The FCI incurs a subsidy of `21.09 per kg for wheat and Rs 29.64 per kg for rice which is reflected in the food subsidy budget.
On May 1, the FCI had food grain stocks of 50.53 million tonne (MT) against the buffer stocks requirement of 41 MT. Besides 6.2 MT of rice is yet to be received by FCI from millers. “Generally, there is no delay in release of food subsidy to the FCI by the government. However, due to short provision of subsidy in the Budget, the FCI had raised short-term loan to meet its working capital requirement,” food minister Ram Vilas Paswan had said in the Lok Sabha.