With the finance ministry having already allocated 80% of the estimated food subsidy of Rs 1.47 trillion for FY25 earmarked for the Food Corporation of India (FCI), the corporation won’t need to take short term loans or use its cash credit limit to finance its activities in the year.
However, sources told FE that with rising cost of holding on to a huge surplus of rice and sluggish open market sale of the grain to bulk buyers, the FCI’s operational expenses are expected to rise in the last quarter of FY25.
Sources said the finance ministry has been communicated about the issue of open-ended procurement of food grains across states which is leading to surplus rice stocks, and possibly necessitating additional food subsidy allocation in the fourth quarter of FY25.
Officials said that the finance ministry has been releasing expenses towards food subsidy timely in the last couple of fiscal years, which has ensured that corporations mostly don’t rely on short-term loans and cash credit limits as being provisioned.
In FY24, the expenses (revised estimate) on account of food subsidy was Rs 2.12 trillion, out of which FCI was allocated Rs 1.39 trillion. However the corporation incurred actual expenses of Rs 1.33 trillion thus surplus allocation is carried into current fiscal.
The food subsidy in FY25 is estimated at Rs 2.05 trillion, which may go up if the government does not liquidate hugely surplus rice stock.
The FCI currently holds 49.16 million tonne (MT) — 28.45 MT of rice stocks and 20.71 MT of grain receivable from millers. The corporation has 21.09 MT of wheat.
The grain stock is against the buffer of 7.61 MT for January 1. Officials said wheat stock is at the manageable level above the buffer, the rice stock are multiple times more than the mandatory norm.
In the current fiscal, while the government has not commenced open market sale of wheat yet while in FY24, the corporation sold a record 10 MT of grain which commenced in June, last year. However in FY25, the FCI has sold less than 0.2 MT of rice so far through weekly auctions to private traders at a discounted price of Rs 28.kg.
With paddy procurement for the 2024-25 season (October-September) is currently on, rice stocks held with FCI are rising adding to higher carry forward stocks. The FCI’s economic cost for rice and wheat for 2024-25 is estimated to increase Rs 39.75/kg and Rs 27.74/kg, from Rs 39.31/kg and Rs 27.09/kg respectively in 2023-24.