1. As food subsidy expenses soar, FCI raises Rs 70,000 cr in FY 16

As food subsidy expenses soar, FCI raises Rs 70,000 cr in FY 16

Due to rising outstanding dues from the finance ministry towards food subsidy expenses, the Food Corporation of India (FCI) had to raise more than Rs 70,000 crore...

By: | New Delhi | Updated: August 3, 2016 6:49 AM

Due to rising outstanding dues from the finance ministry towards food subsidy expenses, the Food Corporation of India (FCI) had to raise more than Rs 70,000 crore in the last financial year as short-term credit (STL) to meet expenses for procurement and distribution of foodgrain. Even in the current financial year, the corporation has raised close to R25,000 crore as short-term loan so far.

“Even though government has substantially increased the budgetary allocation for food subsidy in recent years, owing to other pressing financial commitments, it has not been possible for the government to allocate funds for food subsidy in the budget as per projected requirements of FCI,” food minister Ram Vilas Paswan on Tuesday stated in Parliament.  Paswan said that in order to meet the shortfall between expenses and food subsidy allocation under the Budget, the FCI has been availing STL (around 90 days’ duration) to ensure smooth procurement operations.

The food subsidy budget for FY17 is Rs 1.34 lakh crore, of which Rs 1.03 lakh crore is to be routed through the FCI to the intended beneficiaries. Earlier in May, outstanding dues from the finance ministry to FCI on account of food subsidy allocation had reached Rs 61,000 crore by the end of FY16, according to information provided by the food ministry.

FCI had raised Rs 70,820 crore worth of STL in the last financial year, while the corporation availed Rs 59,415 crore as short-duration loan in FY15. FCI takes STL from various scheduled commercial banks, normally at the base rate of around 10% annual interest rate. Food ministry officials told FE that FCI is forced to avail the short-term loan facility after exhausting the cash credit limit (CCL) of Rs 54,495 crore sanctioned by a consortium of 67 banks, because of inadequate allocation under the food subsidy budget in the last few years.

However, food minister Paswan said that in addition to an increase in the budgetary allocation for food subsidy, the government has also, from time to time, taken various other steps to ensure that sufficient funds are available with FCI to undertake procurement operations. “Some of these steps are sanction of CCL, sanction of ways and means advance and extending government guarantee to FCI for issue of bonds for mobilising funds, so that food procurement operations are not adversely affected,” he said in Lok Sabha.

Officials said unless the large mismatch between the state-run agency’s operational expenses and the government’s food subsidy allocations is addressed, the outstandings due for FCI will rise further in the current fiscal.

Following a 22% 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 the minimum support price (MSP), storage and transportation costs. However, what would inflate the FCI’s costs are the rise in procurement expenses, with the increase in the MSP for paddy in the coming kharif marketing season (2016-17) and rolling out of the National Food Security Act (NFSA) by almost all the states in FY17.

  1. No Comments.

Go to Top