1. Centre releases Rs 25,834 crore to FCI as food subsidy

Centre releases Rs 25,834 crore to FCI as food subsidy

Hints at providing additional sums to reduce dues in current fiscal

By: | New Delhi | Updated: April 6, 2016 8:15 AM
The food subsidy budget for FY17 is R1.34 lakh crore, of which R1.03 lakh crore is to be routed through FCI to the intended beneficiaries. (Source: Reuters) The food subsidy budget for FY17 is R1.34 lakh crore, of which R1.03 lakh crore is to be routed through FCI to the intended beneficiaries. (Source: Reuters)

In a bid to support Food Corporation of India (FCI) to carry out wheat procurement for the 2016-17 rabi marketing season, the government on Tuesday released the first installment of Rs 25,834 crore as food subsidy for the current fiscal. Besides, the government is expected to provide additional resources to FCI later this fiscal for reducing the corporation’s outstanding dues, which are at estimated to be Rs 60,000 crore by end of last fiscal.

“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 said. It said that in addition to the food subsidy amount released to FCI in the current fiscal, a ‘wage and means’ advance of Rs 10,000 crore will be released to the corporation by the finance ministry shortly.

“FCI is also raising short-term loans from banks up to a maximum limit of R30,000 crore. Recourse to these loans will be made by FCI as and when required. Taken together these funds, there will be sufficient resources to manage rabi procurement which has just started,” the statement stated.

The food subsidy budget for FY17 is R1.34 lakh crore, of which R1.03 lakh crore is to be routed through FCI to the intended beneficiaries.

Dues to FCI would reach levels of over R90,000 crore by end-March 2017 unless the large mismatch between the state-run agency’s operational expenses and the government’s food subsidy allocations is addressed.

As reported by FE recently, an internal FCI estimate says FCI would require some 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.

What would inflate FCI’s costs are the rise in procurement expenses with the likely increases in minimum support prices (MSPs) for paddy and wheat — for the rabi season, the MSP for wheat has already been hiked by Rs 75 to Rs 1,525 a quintal — and the 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, FCI has needed to raise R25,000-crore as short-term (90-day) loans in the current fiscal, 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 FY13, FY14 and FY15.

The finance ministry has turned down FCI’s proposal to address its financial woes by letting Life Insurance Corporation of India raise R40,000 crore through bonds supported by the government.

Between them, FCI and state government agencies are set to buy 30 million tonne (MT) of wheat during April-June 2016.

Till now, states that haven’t implemented NFSA have been getting wheat and rice at central issue prices of R4.15 a kg and R5.65 a kg, respectively, for families below the poverty line (BPL). However, under NFSA, close to 820 million people would get 5 kg each of wheat and rice at R2 and R3 per kg, respectively, jacking up FCI’s costs.

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