Even as finance minister Arun Jaitley has made a R98,000-crore provision for Food Corporation of India (FCI) for FY16 under the food subsidy budget, outstanding dues to the corporation continue to rise given the lack of any special allocations to clear the arrears.
Sources told FE that the finance ministry’s dues to FCI would increase to R56,127 crore by the end of FY15, further affecting the corporation’s operations. At the start of the current fiscal, a sum of R45,646 crore was payable to FCI.
Having had to hold huge grain stocks under the government’s directive (there was some let-up in recent months but the average stock levels in the past year have been huge), FCI’s expenses in the current fiscal would exceed the budgeted amount by R10,481 crore.
The food ministry, sources said, had sought an allocation of R1.37 lakh crore as subsidy for FY15 as the finance ministry was finalising the revised numbers. This included close to R92,000 crore earmarked for FCI so that the arrears could be settled. But given the Centre’s fiscal constraints, the subsidy in FY15 was fixed at R1.23 lakh crore (revised estimate).
FCI’s costs of procurement, storage and transportation have been rising steadily, driven by the annual rise in the minimum support price (MSP) and excess grain stocks in storage. At the start of February 2015, FCI had grain stocks of 47 million tonne against the buffer norm of 21.4 million tonne.
“The finance ministry’s allocation of food subsidy is not enough for FCI to meet its day-to-day expenses,” a food ministry official said.
The corporation has raised Rs 20,000-crore short-term loans three times in the current fiscal, after exhausting its cash credit limit of Rs 54,000 crore from designated banks. It had raised Rs 20,000 crore as short-term loans in 2012-13 and 2013-14. The money raised was used to meet short-term fund requirements for procurement and distribution of foodgrain.
The corporation depends on an annual cash credit limit of Rs 54,495 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 Rs 7,400 crore towards interest payment last fiscal because of huge borrowings from banks,” a food ministry official said.
The fund crunch comes at a time when FCI needs to step up in the wake of the Food Security Act, 2013, where 84 crore people would get highly subsidised foodgrain. FCI currently distributes subsidised foodgrain to more than 40 crore under the Targeted Public Distribution System (TPDS).