The finance ministry has doled out Rs 25,000 crore to Food Corporation of India (FCI) as food subsidy allocation for the second quarter of the current fiscal.
The finance ministry has doled out Rs 25,000 crore to Food Corporation of India (FCI) as food subsidy allocation for the second quarter of the current fiscal. The allocation has come a month earlier than usual and is expected to help the corporation in its procurement drive.
Having received the subsidy amount, sources said the FCI has decided not to take short-term loan at least for the next quarter to meet its operational expenses.
In early April, the finance ministry had released the first instalment of Rs 25,834 crore as food subsidy for the current fiscal to the FCI when the wheat procurement drive for the 2016-16 rabi marketing season commenced.
“With the July-September period being a relatively lean period as rice procurement would commence only by October and wheat procurement for the season already completed, we don’t need to go in for a short-term loan for the first time in the last couple of years,” an official said.
The food subsidy budget for FY17 is `1.34 lakh crore, of which `1.03 lakh crore is to be routed through the FCI to the intended beneficiaries. “During 2016-17, the government may consider additional food subsidy over and above budgetary provision, if required, towards the end of the financial year to further bring down the subsidy arrears,” a food ministry statement noted.
The corporation’s outstanding dues are estimated to be around `60,000 crore by the end of FY16.
The official said, earlier along with `25,834 crore of first instalment under food subsidy to the FCI, the finance ministry had released ‘wage and means’ advance of `10,000 crore.
As reported by FE recently, an internal FCI estimate says it would require some `32,000 crore more than the budgetary outlay of `1.03 lakh crore in FY17 to carry out its operations — foodgrain procurement, storage and distribution.
However, following a 22% drop in wheat procurement in the 2016-17 rabi marketing season to 22 million tonne (MT) against a target of 28 MT, the corporation would incur lesser expenses towards Minimum Support Price (MSP), storage and transportation costs.
However, what would inflate the FCI’s costs are the rise in procurement expenses with the increase in the MSP for paddy in the forthcoming kharif marketing season (2016-17) and 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, the FCI often needs to resort to raising short-term (90-day) loans after exhausting its cash credit limit of `54,000 crore with designated banks. It had raised about `20,000 crore each as short-term loans in FY14, FY15 and FY16.
The finance ministry had turned down the FCI’s proposal to address its financial woes by letting Life Insurance Corporation of India (LIC) raise `40,000 crore through bonds supported by the government.