FCI pays Rs 14,000 cr for excess stocks

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New Delhi | Updated: November 17, 2014 4:36:45 AM

By Jan, the buffer will be 35 mt more than what is required...

Even at the current levels of stock, FCI is still spending around Rs 14,000 crore each year in holding costs.(Reuters)Even at the current levels of stock, FCI is still spending around Rs 14,000 crore each year in holding costs.(Reuters)

While the Food Corporation of India (FCI) has been able to reduce its food stocks by around 16 million tonnes (mt) over the past two years, the progress is slow. The reduction in stocks — partly the result of lower procurement due to lower hikes in minimum support prices — will help reduce FCI’s carrying costs by a little over R7,000 crore. The total food subsidy bill for FY15 is budgeted at R1.2 lakh crore.

Even at the current levels of stock, FCI is still spending around R14,000 crore each year in holding costs. While food stocks were 53.2 mt on November 1 this year, the buffer — which includes a strategic reserve — was meant to be 21.2 mt as on October 1.

By January, the buffer is meant to be 25 mt. Based on the expected rice procurement over the next two months and the likely offtake of foodgrains from the PDS, however, estimates are FCI will end up with a buffer of 60 mt on January 1, or 35 mt more than what is required.

Thanks to FCI not being able to export extra stocks some months ago, despite the UPA Cabinet clearing it, the stocks cannot be liquidated through exports either as prices have crashed from around $300 per tonne to around $250 per tonne now. So, any exports will have to be made at losses and will put India under pressure at WTO since this will be seen as subsidising exports.


“Even now, the FCI holds far more grain stocks than required, this is especially true of wheat. The corporation could have exported more wheat when the global prices for the grain were ruling high last year,” Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices, said. In 2012-13, the FCI had exported 4.5 mt of wheat from its excess stocks and realised Rs 7,000 crore at an average price of $310 per tonne.

However, at the current global price of $230 per tonne, exports are hardly viable.

The government has constituted a committee to look at restructuring the role of FCI, and the report is expected within the next two months.

Thanks to the deferment of the implementation of the Food Security Act and the reduction in FCI’s stocks, the government spent Rs 46,000 crore on food subsidies in the first half of the year compared with Rs 54,000 crore in the same period last year.

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