Govt dues to FCI likely to rise above Rs 40,000 crore in 13-14

Written by Sandip Das | New Delhi | Updated: Jul 10 2013, 04:43am hrs
The governments dues to the Food Corporation of India (FCI) have been steadily rising over the last two years, which has forced the corporation to seek bank credit for running its operations.

Sources told FE that accumulated government dues to FCI would rise beyond R40,000 crore by the end of the current fiscal because of the gap between allocation under food subsidy and the actual cost of operations (of storing and distributing foodgrain).

At the start of the current fiscal, the government had to pay over R32,000 crore to FCI towards outstanding dues from the previous year. Sources said that due to the mismatch between food subsidy allocation and the cost of operations, the dues are set to rise by another R12,000 crore this year.

FCIs cost of operations has been rising sharply mainly due to storage expenses and the annual rise in the minimum support price (MSP) offered to farmers over the last five years. The finance ministrys allocation of food subsidy is not enough for FCI to meet its expenses. On June 1, FCI had foodgrain stocks in excess of 77 million tonne against strategic reserve and buffer stock norms of 31 mt.

For meeting our expenses, we (FCI) seek bank credit, on which we pay interest. Our borrowing costs go up significantly, a food ministry official said.

In the current fiscal, the government has allocated R90,000 crore under food subsidy expenses, which include R10,000 crore for the implementation of the food security law, expected to be rolled out during the next six months.

However, FCI has been allocated only R75,000 crore (excluding expenses in decentralised states such as Madhya Pradesh) against its demand of R87,000 crore for 2013-14.

This comes at a time when FCI is required to take up bigger operations for the implementation of the food security Bill. The law, which aims to supply 62 million tonne of rice, wheat and coarse cereals to about 84 crore, is expected to cost around R125,000 crore annually.

FCI distributes subsidised foodgrains to more than 40 crore under the Targeted Public Distribution System (TPDS) at present.

It depends on the annual cash credit limit of R54,495 crore from 62 public sector and scheduled banks for carrying out its operations. The cash credit limit is fixed by the finance ministry annually in consultation with the food ministry

The government had allowed FCI to raise unsecured short-term loan up to R20,000 crore for meeting its cash flow requirements. Besides, FCI raised R5,000 crore in March through issuing bonds. Recently, it sought permission from the finance ministry to raise another R8,000 crore through issuance of bonds.

The cash credit facility available to FCI was inadequate to meet its working capital requirements during the last three years. Due to this, the corporation had to borrow funds from banks by availing short-term loans from time to time, food minister KV Thomas had recently told FE.