The Food Corporation of India (FCI) is likely to avail short-term loans of up to Rs 40,000 crore to finance its activities, even though it has received Rs 1.26 lakh crore, or 95% of the total projected food subsidy of Rs 1.34 lakh crore for FY25, from the finance ministry so far, sources told FE.
They said the finance ministry usually releases the remaining 5% of food subsidy expenses to the FCI after the required audit of accounts. The corporation will avail short-term loans to meet its day-to-day expenditure till the time the remaining subsidies for the current fiscal and a portion of the allocation for the next fiscal are released by April. Officials said around Rs 5,900 crore of unspent subsidy for FY24 has been carried forward to the current financial year and is at the disposal of the corporation. And, there is a likely shortfall of around Rs 10,000 crore in FY25, including Rs 6,000 crore receivable after settlements of accounts, they said.
“As provisioned, we may go for short-term loans to finance our activities in the rest of the current financial year, also considered a lean period in terms of activities,” an official said. The procurement of wheat for the 2025-26 season (April-June) is scheduled to begin from June 1.
To meet cash-flow mismatches and to provide temporary working capital to the corporation, which handles more than 70% of the Centre’s food subsidy budget, there is a provision for FCI to avail short-term loans with a tenure of 90 days up to Rs 75,000 crore at any given point of time. The annual rate of interest charged by designated banks for the loans ranges between 6.79% and 7.39%. The FCI has projected a food subsidy expense of Rs 1.55 lakh crore for 2025-26, while the government has projected a modest increase of 3% in food subsidy expenses to Rs 2.03 lakh crore for FY26 compared to the revised estimate for the current financial year. Officials said the finance ministry had been releasing expenses towards food subsidy timely in the past couple of financial years, ensuring that the corporation does not rely on short-term loans and cash-credit limits.
The FCI currently holds foodgrain stocks of 50.85 million tonne (MT) — 36 MT of rice and 14.85 MT of wheat. The stocks exclude 33 MT of rice receivable from millers. The stock is against the buffer of 21.41 MT for April 1. “Despite the FCI currently holding grain stocks more than three times the buffer, upfront release of food subsidy has helped it avoid borrowing in case of shortfall or delay in subsidy flow,” an official said. As a result, the FCI’s economic cost for rice and wheat for 2024-25 is estimated to increase to Rs 39.75/kg and Rs 27.74/kg from Rs 39.31/kg and Rs 27.09/kg in 2023-24, respectively.