1. Finmin to provide Rs 40,000 crore to FCI as ‘wage and means’ advance

Finmin to provide Rs 40,000 crore to FCI as ‘wage and means’ advance

Aware that the Food Corporation of India (FCI) is hamstrung by the delays in receipt of subsidy amounts, the finance ministry has decided to provide R40,000 crore to it as ‘wage and means’ advance soon. This is in addition to the subsidy of R51,000 crore released in the first half of this fiscal and R10,000 crore provided as advance.

By: | Updated: October 4, 2016 7:07 AM
The food subsidy allocated under FY17 Budget is Rs 1.03 lakh crore. (Source: Reuters) The food subsidy allocated under FY17 Budget is Rs 1.03 lakh crore. (Source: Reuters)

Aware that the Food Corporation of India (FCI) is hamstrung by the delays in receipt of subsidy amounts, the finance ministry has decided to provide Rs 40,000 crore to it as ‘wage and means’ advance soon. This is in addition to the subsidy of Rs 51,000 crore released in the first half of this fiscal and R10,000 crore provided as advance.

The move would help the corporation avoid taking fresh bank loans to run its operations.

Inadequate food subsidy provisions have in the past forced the FCI to resort to short-term borrowings, which resulted in debt pile-up.

The food subsidy allocated under FY17 Budget is Rs 1.03 lakh crore. The subsidy dues had touched R60,000 crore at the end of FY16. The corporation has been seeking approved “cash credit limit” and also short-term loans from the banks to run procurement and distribution operations. The corporation usually seeks banks loans after exhausting the allocated funds under the food subsidy.

The advances will finally be settled against the subsidy obligations.

“Unlike in the past, we would receive the entire food subsidy for the current year in time,” an official said.

At present, it’s a relatively lean period as the corporation would receive rice procured by the statement government agencies for 2016-17 session (Oct-September) only by November or December and the wheat procurement for the season already completed.

“During 2016-17, the government may consider additional food subsidy over and above budgetary provision, if required, towards the end of the financial year to further bring down the subsidy arrears,” a food ministry statement recently said.

Earlier, an internal FCI estimate stated that it would require around R32,000 crore more than the budgetary outlay of R1.03 lakh crore in FY17 to carry out its operations — foodgrain procurement, storage and distribution. However, following a 23% drop in wheat procurement in the 2016-17 rabi marketing season to 23 million tonne (MT) against a target of 28 MT, the corporation would incur lesser expenses towards Minimum Support Price (MSP), storage and transportation costs.

However, what may inflate the FCI’s costs are the rise in procurement expenses with the increase in the MSP for paddy in the forthcoming kharif marketing season (2016-17) and rolling out of the National Food Security Act (NFSA) by almost all states in FY17.

With the delayed and inadequate release of subsidy funds by the finance ministry, the FCI often needs to resort to raising short-term (90-day) loans after exhausting its cash credit limit of R54,000 crore with designated banks. It had raised about R20,000 crore each as short-term loans in FY14, FY15 and FY16.

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