Food Corporation of India (FCI) will soon issue bonds worth R5,000 crore to reduce borrowing costs and increase cash flow.
While the food ministry has alreday given its nod, sources say the corporation is waiting for an approval from the finance ministry.
FCI had issued bonds worth R3,914 crore in 2005. After FCI mops up the requisite amount through bonds, it will reduce dependence of the corporation on cash credit limit.
FCI depends on the cash credit limit of R 54,495 crore from 62 public sector and scheduled banks for carrying out its operations. Cash credit limit is annually fixed by the finance ministry in consultation with food ministry.
An official said while the government allocates funds annually under the food subsidy bill to FCI, the corporation also incurs losses because of holding on to huge stocks.
FCI’s authorised and paid-up capital is around R2,500 crore and its borrowing cannot exceed 10 times its capital and reserve fund. FCI official said that the banks charge penal interest above R54,000 crore of credit.
“Cash credit facility available to FCI was inadequate to meet the working capital requirement during last three years. Due to inadequate cash credit limit, the corporation had to borrow funds from the banking sector by availing short-term loan from time to time,” food minister KV Thomas said.