Finance Ministry releases Rs 25,000-cr food subsidy to FCI | The Financial Express

Finance Ministry releases Rs 25,000-cr food subsidy to FCI

The FCI avails STLs of 90 days’ duration, from scheduled banks, to address cash flow mismatches arising from inadequate release of food subsidy by the finance ministry.

Finance Ministry releases Rs 25,000-cr food subsidy to FCI
Expenses of around Rs 93,000 crore by the FCI in the first two quarters of the current fiscal

With the finance ministry recently releasing more than Rs 25,000 crore towards food subsidy expenses, the Food Corporation of India (FCI) has paid back the short-term loan (STL) of around Rs 19,000 crore availed from the banks.

The FCI avails STLs of 90 days’ duration, from scheduled banks, to address cash flow mismatches arising from inadequate release of food subsidy by the finance ministry.

Sources told FE that against expenses of around Rs 93,000 crore by the FCI in the first two quarters of the current fiscal, the ministry had so far allocated more than Rs 86,000 crore under the food subsidy budget. The ministry earlier provided Rs 10,000 crore in the current fiscal as wage and means advances, which is adjusted against food subsidy budget by the end of the fiscal.

Finance minister Nirmala Sitharaman, in her Budget speech for 2021-22, had announced an end to the practice of extra-budgetary borrowing from the next fiscal by making provisions of Rs 3.35 trillion towards payment of NSSF loans. However, some delays in subsidy release forced it to resort to STL again.

For 2022-23, the Centre has allocated Rs 2.06 trillion for food subsidy expenses, of which Rs 1.45 trillion or 71% is provided to FCI. The rest of the food subsidy is directly routed to states that follow a decentralised procurement system.

However, following the extension of the Pradhan Mantri Garib Kalyan Anna Yojana till September 30, an additional `80,000 crore (Rs 56,000 crore through FCI) will be spent under the food subsidy budget.

The corporation has been relatively comfortable with the cash position over the last one year, as the government promptly released food subsidy amounts, after the practice of taking National Small Saving Fund (NSSF) loans for subsidy financing was stopped in the FY22 Budget for the sake of transparency.

The central issue prices of Rs 3, Rs 2 and Rs 1 for a kilo of rice, wheat and coarse grains, respectively, under the National Food Security Act (NFSA) have not been revised since 2013. On the other hand, according to Budget Estimates, FCI’s economic cost (minimum support price to farmers, storage, transportation and other costs) of rice and wheat for 2022-23 is Rs 36.70 and Rs 25.88 per kg, respectively.

The FCI procures and distributes more than 70-80 million tonne of wheat and rice annually. The corporation manages procurement, storage and transportation of rice and wheat to states for distribution, mainly for NFSA and other welfare schemes.

Due to a huge mismatch between rising expenses because of open-ended procurement of rice and wheat from farmers under minimum support price operations, and cost of carrying excess stocks between 2016-17 and 2020-21, the government had provided FCI funds from loans taken from the NSSF from 2016-17 to 2020-21 in lieu of food subsidy.

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