At a time when state-owned foodgrain procurement agency Food Corporation of India (FCI) needs financial muscle to carry out its record buying of wheat, rice and other commodities, it faces a significant cash-flow crunch. The reason: the ministries of rural development and human resources development haven?t settled FCI bills of more than Rs 20,000 crore, some of which have been outstanding for up to five years.
The delay in the settlement of these bills is putting pressure on FCI?s cash credit limit. The agency operates through a cash credit limit of Rs 35,000 crore, provided by a consortium of 44 banks headed by State Bank of India.
?Out of Rs 35,000 crore, more than half is blocked due to debts owed to us by the two ministries,? Alok Sinha, FCI chairman & managing director, told FE. ?The supporting banks charge penal interest above Rs 35,000 crore and if FCI overdraws, then the interest outgo shoots up. As our debts go up, our expenditure goes up, ? he added.
FCI?s authorised and paid-up capital is around Rs 2,500 crore and its borrowing cannot exceed ten times its capital and reserve fund. Though a proposal to hike FCI?s paid-up capital to Rs 3,500 crore was submitted to the Cabinet Committee on Economic Affairs in March, the panel is yet to take a decision. ?If our capital base is increased, then our cash credit limit can go up,? Sinha said.
FCI supplies grain for the implementation of the food-for-work programme under the ministry of rural development, and the mid-day meal scheme implemented by the HRD ministry. Whereas FCI is paid in advance for supplies of grain to be distributed through the public distribution system and to the armed forces, contributions to both ministries? flagship schemes are made on credit. Bills are settled from budgetary provisions for the two anti-poverty programmes, while FCI bears the interest cost of borrowing money.
?It is a long drawn out process. Some of the pending bills from the two ministries are more than five years old,? Sinha pointed out. Though top officials from the ministries of finance, rural development and HRD have met many times to reconcile accounts, there has been no concrete outcome.
In 2006-07, the finance ministry had settled a major chunk of FCI?s dues pending from the rural development ministry and other departments by issuing bonds worth Rs 16,200 crore. However, since then, outstanding bills have been rising again and now stand at around Rs 20,000 crore.