The Food Corporation of India (FCI) has availed short term loan of Rs 22,000 crore in the current fiscal to finance its operations due to inadequate provisioning of the food security expenses by the finance ministry.

Sources told FE that against expenses of more than Rs 75,000 crore in the current fiscal, the finance ministry has allocated around Rs 52,000 crore under the food subsidy budget till now. In the current month, ministry has not allocated any funds under food security expenses to the FCI.

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The corporation has been relatively comfortable with its cash position in FY22 as the government promptly released food subsidy amounts, after ending practice of taking National Small Saving Fund (NSSF) loans for subsidy financing in the FY22 Budget for the sake of budgetary transparency.

The Corporation could go for seeking more short-term loans, if the ministry doesn’t release funds soon. It has already got a loan amount of Rs 75,000 crore sanctioned by banks.

The ministry has also provided Rs 10,000 crore in the current fiscal as wage and means advances, which is adjusted against the food subsidy budget by the end of the fiscal.

FCI avails short-term loans, which are of 90 days’ duration, from scheduled banks to address cash flow mismatches because of inadequate release of food subsidy by the finance ministry.

Raising more short-term loans would have pushed up FCI’s expenses because of higher interest outflow. These short-term loans carry an interest rate in the range of 3.85 – 5.5% per annum.

Meanwhile, several ministries such as rural development, education and external affairs have pending dues payment of around Rs 2900 crore to FCI agains the grain supplied for various social welfare schemes.

For 2022-23, the central government has allocated Rs 2.06 trillion for food subsidy expenses, of which Rs 1.45 trillion or 71% is provided to FCI. Rest of the food subsidy is directly routed to states who follow a decentralised procurement system.

However, following the extension of the Pradhan Mantri Garib Kalyan Anna Yojana till September 30, an additional Rs 80, 000 crore (Rs 56,000 crore through FCI) will be spent under the food subsidy budget.

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The corporation has been relatively comfortable with the cash position over the last one year as the government promptly released food subsidy amounts, after the practice of taking National Small Saving Fund (NSSF) loans for subsidy financing was stopped in theFY22 Budget for the sake of transparency.

The central issue prices of Rs 3, Rs 2 and Re 1 for a kilo of rice, wheat and coarse grains, respectively, under the National Food Security Act (NFSA) have not been revised since 2013. On the other hand, FCI’s economic cost (minimum support price to farmers, storage, transportation and other costs) of rice and wheat for 2022-23 is Rs 36.70 and Rs 25.88 per kg, respectively.

FCI procures and distributes more than 60 million tonne of wheat and rice annually. The corporation manages procurement, storage and transportation of rice and wheat to states for distribution, mainly for NFSA and other welfare schemes.

Due to a huge mismatch between rising expenses because of open-ended procurement of rice and wheat from farmers under minimum support price operations, and cost of carrying excess stocks between 2016-17 and 2020-21, the government had provided FCI funds from loans taken from the NSSF from 2016-17 to 2020-21 in lieu of food subsidy.

Finance minister Nirmala Sitharaman, in her Budget speech for 2021-22 had announced an end to the practice of extra-budgetary borrowing from the next fiscal by making provisions of Rs 3.35 trillion towards payment of NSSF loans.