1. Food Corporation of India may be forced to seek expensive loans from banks; here’s why

Food Corporation of India may be forced to seek expensive loans from banks; here’s why

It may continue to face financial hardships in FY18 and be forced to seek short-term loan from banks

By: | New Delhi | Updated: May 8, 2017 5:54 AM
Sources told FE that the finance ministry has recently released `49,000 crore under the food subsidy allocation for FY18 to the FCI. (PTI)

With the Centre’s outstanding dues to the Food Corporation of India (FCI) touching Rs 58,000 crore by the end of the previous financial year, the state-run entity may continue to face financial hardships in the current fiscal as well and be forced to seek expensive short-term loan from banks.

Sources told FE that the finance ministry has recently released `49,000 crore under the food subsidy allocation for FY18 to the FCI. Also, it is likely to release the balance amount form the current year’s total food subsidy budget of Rs 1.07 lakh crore over the next couple of months.

However, this will not be sufficient for the corporation to carry out its activities uninterruptedly. What worries the corporation is that the finance ministry has not made special provisions for clearing the accumulated dues. “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 FCI official said. At present, the FCI has Rs 38,000 crore worth of short-term loan which has to be repaid over the next couple of months.

While the FCI got Rs 45,000 crore from the National Small Savings Fund (NSSF) as loan under a five-year special arrangement in the last fiscal, the finance ministry has not made any such provision for the current fiscal. Meanwhile, FCI’s annual cash credit limit (CCL) of Rs 54,495 crore sanctioned by a consortium of 67 banks has been reduced to `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 the buffer norms also adds up to cost of operations.

The FCI incurs a subsidy of Rs 21.09 per kg in case of wheat and Rs 29.64 per kg for rice which is reflected in the food subsidy budget. On April 1, the FCI had food grain stocks of Rs 31.14 million tonne (MT) against the buffer stocks requirement of 21 MT. Besides 6.7 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 said in the Lok Sabha.

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