Dues to FCI could pile up to Rs 90k crore

By: | Updated: March 29, 2016 1:52 AM

Dues to Food Corporation of India (FCI) will reach levels of over R90,000 crore by end March 2017 unless the large mismatch between the state-run agency’s operational expenses...

global businessesAn internal FCI estimate says FCI would require some Rs 32,000 crore more than the budgetary outlay of Rs 1.03 lakh crore in FY17 to carry out its operations — foodgrain procurement, storage and distribution.

Dues to Food Corporation of India (FCI) will reach levels of over Rs 90,000 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.

An internal FCI estimate says  FCI would require some Rs 32,000 crore more than the budgetary outlay of Rs 1.03 lakh crore in FY17 to carry out its operations — foodgrain procurement, storage and distribution. The food subsidy budget for FY17 is Rs 1.34 lakh crore, of which Rs 1.03 lakh crore is to be routed through FCI to the intended beneficiaries.

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 Rs 25,000-crore as short-term (90-day) loans in the current fiscal, after exhausting its cash credit limit of Rs 54,000 crore with designated banks. It had raised about Rs 20,000 crore each as short-term loans in FY13, FY14 and FY15.

As reported by FE earlier, the finance ministry has turned down FCI’s proposal to address its financial woes by letting Life Insurance Corporation of India raise Rs 40,000 crore through bonds supported by the government.

Between them, FCI and state government agencies are set to buy 30 million tonnes 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 `4.15 a kg and `5.65 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 `2 and `3 per kg, respectively, jacking up FCI’s costs.

With the exception of Tamil Nadu, Kerala, Manipur and Nagaland, all other states and union territories have already rolled out the NFSA. Tamil Nadu is expected to jon the bandwagon after the forthcoming state assembly elections.

In the current fiscal, the government’s food subsidy allocation to FCI has been `1.12 lakh crore, almost at par with its actual expenses. However, with dues from the previous years, the unpaid bill is hovering around `60,000 crore (see chart).

The public distribution system (PDS) operational costs have risen sharply in the past few years due to the increase in the MSP of grains (mostly rice and wheat)  as well as the high expenses on storage. FCI has been keeping foodgrain stocks much above the buffer stock levels notified by the government.

Gr4

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