The finance ministry has released Rs 38,400 crore to the Food Corporation of India (FCI) in the first quarter of the current fiscal, a move that would reduce the corporation’s dependence on short -term loans in the coming months.
The FCI has projected a food security expenses of Rs 1.29 lakh crore for FY26 against the total food subsidy budget of Rs 2.03 trillion. Rest of the subsidies are directly provided to those states who follow a decentralized procurement system.
Sources told FE that while the FCI has taken Rs 19,000 crore as short-term loans in Q1, it may not require to take additional loans in next quarter, because of ‘lean’ months in terms of procurement and upfront release of subsidy.
“Till October, we will pay back short-term loans and may not raise additional credit as provisioned,” an official said.
After completion of wheat procurement, the paddy procurement for 2025-26 season (October-September) will commence. The finance ministry had released Rs 10,800 crore to FCI last month.
The FCI currently holds 73.69 million tonne (MT) — 37.6 MT of rice and 36.09 MT of wheat. This stock excludes over 21 MT of rice receivable from millers. The stock is against the buffer of 41.12 MT for July 1.
To meet out cash flow mismatches and to provide temporary working capital to the corporation, there is a provision for FCI to avail short term loan with a tenure of 90 days upto Rs 75,000 crore at any given point of time. The annual rate of interest charged by designated banks ranges between 6.79% to 7.39% per annum.
More than 70% of the centre’ food subsidy budget is allocated to FCI for carrying out the activities of procurement of foodgrains under the minimum support price (MSP) operations from farmers and distributing them to states for the free ration scheme.
Officials said out of total borrowing of FCI at Rs 55,700 crore at present, a major chunk includes Rs 36,700 crore worth of bonds which are payable during 2028-30 in parts.
The finance ministry has been releasing expenses towards food subsidy timely in the last couple of fiscal years, which had ensured that corporations mostly did not rely on short-term loans and cash credit limits as being provisioned.
Annually the corporation supplies around 36 – 38 MT of rice and 18 – 20 MT of wheat under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) or free ration scheme while the procurement has been over 50 MT for the last many years leading to piling up of stocks.
Officials said that for the last few years the agencies are buying over 76 MT of rice and wheat annually while the requirement under the PMFBY is around 56 to 58 MT. “Higher procurement of grains against the requirements are adding up to economic costs despite the government liquidating some stocks through open market sale,” an official said.
Correspondingly, the FCI’s economic cost for rice and wheat for 2025-26 is estimated to increase Rs 41.73/kg and Rs 29.80/kg, from Rs 40.42/kg and Rs 28.50/kg respectively in 2024-25.