Unable to clear all outstanding subsidy dues to the Food Corporation of India (FCI), the finance ministry is considering prodding banks to give the corporation a soft loan spread over five years, so that its operations are not undermined for paucity of funds.
Also, North Block may accept a proposal from the food ministry under which, in future, the FCI will receive budget outlays promptly to cover 95% of the actual expenses incurred by it in any year. This would ensure that dues don’t pile up afresh.
Outstanding dues to the FCI currently stand at around Rs 50,000 crore.
Food ministry officials said for the last many years, FCI has been forced to avail short-term loan facility after exhausting its cash credit limit (CCL) of R54,495 crore sanctioned by a consortium of 67 banks because of inadequate allocations under the food subsidy budget.
The new five-year soft loan facility will be made feasible with the government bearing the cost of the interest relief to be given by banks. The soft loan will be of the order of R10,000 crore a year and will be given by designated public-sector banks.
The move, the officials said, would reduce the need for costlier short-term credit for FCI.
The finance ministry had rejected a food ministry proposal last year for the government to be the guarantor to 10-year bonds issued by LIC to bridge the FCI’s resource gap.
At the start of the current fiscal, FCI had estimated 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 at minimum support prices, storage and distribution.
However, following a 17% drop in wheat procurement in the 2016-17 rabi marketing season to 23 million tonne (MT) against a target of 28 MT, the corporation’s expenses could turn out to be less than that estimate.
“We may need an additional Rs 7,000-10,000 crore over the budgeted amount in the current fiscal to meet our expenses,” an FCI official said.
Officials said besides the lower procurement of wheat in the recently concluded rabi marketing season of 2016-17, FCI has been reducing excess wheat stocks through selling the grain to bulk buyers through Open Market Sale Scheme.
Last fiscal, FCI had sold 7.1 MT of wheat in the open market, thus reducing cost for carrying excess grain.