Food ministry facing fund shortage

By: | Updated: August 5, 2015 1:04 AM

The Union food ministry is facing a shortage of funds for the disbursement of food subsidy to Food Corporation of India (FCI) as well as states such as Madhya Pradesh, Chhattisgarh and Odisha that have adopted the Decentralised Procurement Programme (DCP).

Food shortageThe Union food ministry is facing a shortage of funds for the disbursement of food subsidy to Food Corporation of India (FCI) as well as states such as Madhya Pradesh, Chhattisgarh and Odisha that have adopted the Decentralised Procurement Programme (DCP). (Reuters)

The Union food ministry is facing a shortage of funds for the disbursement of food subsidy to Food Corporation of India (FCI) as well as states such as Madhya Pradesh, Chhattisgarh and Odisha that have adopted the Decentralised Procurement Programme (DCP).

According to food minister Ram Vilas Paswan, the outstanding dues to FCI are expected to rise beyond R78,000 crore in the current fiscal due to a mismatch between expenses incurred by FCI and annual allocation under the food subsidy. Even the outstanding dues on account of food subsidy to the states under the DCP are expected to be around R6,405 crore by the end of the current fiscal.

“Owing to less allocation of funds in the Budget compared to the projected requirement, this department is facing shortage of funds in disbursing food subsidy to FCI as well as to states,” Paswan told the Lok Sabha.

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As reported by FE earlier, Paswan said the government had taken several measures to make available sufficient funds to FCI and at present was considering a proposal to raise R40,000 crore through the issue of bonds from Life Insurance Corporation of India (LIC).

FCI has estimated that the subsidy arrears due from the government would increase to R78,475 crore by the end of the current fiscal. With several states now implementing the National Food Security Act, the actual food subsidy this fiscal could be higher than the budgeted outlay of R1.24 lakh crore by R22,348 crore or so. While the bulk of the food subsidy is routed through FCI, states like Madhya Pradesh and Chhattisgarh, which follow a “decentralised” procurement model, get their dues from the Centre directly.

FCI’s costs of procurement, storage and transportation have been rising steadily over the years, driven by the annual rise in the minimum support price and the excess grain stocks held by the corporation. At the start of July 2015, FCI had grain stocks of 54 million tonnes against the buffer norm of 21 million tonnes (MT). In June 2012, the stocks stood at a record 82 MT. The corporation depends on an annual cash credit limit of R54,495 crore from 62 public sector and scheduled banks to carry out operations. The cash credit limit is fixed by the finance ministry every year in consultation with the food ministry. “FCI incurred expenses of more than R7,400 crore towards interest payment in 2013-14 because of huge borrowings from banks,” the official said.

Paswan said that food ministry has regularly been pursuing the matter regarding allocation of sufficient funds for food subsidy.

“Though government has increased the budgetary allocation for food subsidy in recent years but owing to budgetary constraints and other pressing financial commitments, allocation made is still insufficient to meet the actual requirement of funds, especially in respect of FCI,” he said.

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