to continue its operations of procuring at MSP and selling at FSA prices.
The solution has to be one with no further adverse effects on the fiscal position of government and so the burden of payment would have to be borne by other entities.
Innovations in financing the food subsidy
Either an SPV (special purpose vehicle) funded by a consortium of public sector banks could buy the receivables or FCI with expert assistance could convert the receivables into ‘Rights for creation of Social capital’. These could be offered for sale to corporate India (for cash) in tranches, year after year.
Why would corporate India bite is the natural question?
Under CSR (corporate social responsibility), now mandatory, they could be induced to buy these rights that offer no return but can booked in the accounts of the corporate as “investment in social/ human capital of India”.
This investment could be allowed to be taken as an asset on the balance sheet of the corporate after allowing it to be deducted as an expense in its profit and loss account, thereby capitalising the subsidy paid to FCI.
Corporate India must effectively audit the distribution of foodgrains under its acquired rights at the last mile, given that it would help clean up the distribution system.
Further, we must allow the corporates to take publicity and mileage from the village that they are funding the subsidy so that they may target their investment to geographies of their preference. This may interfere with the mileage for the ruling party but those below the poverty line may welcome the additional benefits.
The government increases its food security net with zero effect on the fiscal deficit and could even escape subsidy if it abandons the subsidy payment to FCI altogether. What is assured is that the ambitious food security bill may secure additional sources of funding from the organized corporate sector.
The drawdown of foodgrains can be increased manifold to the extent of purchase of rights by corporate India. At worst, a guarantee may be invoked by FCI against government if the rights are not purchased. If proved successful