Despite the finance ministry releasing Rs 27,590 crore or 20% of its annual food subsidy in the first two months of FY26 to the Food Corporation of India (FCI), it has availed a short-term loan of Rs 19,190 crore, This is because the huge surplus of grain stocks held by the corporation has inflated the economic costs of operations.
Sources said that as the finance ministry has been releasing weekly food subsidies of Rs 700 – Rs 800 crore FCI to meet the working capital requirement, the corporation may not seek more short-term loans for the time being.
The FCI currently holds 74.67 million tonne (MT) — 38.01 MT of rice and 36.65 MT of wheat. This stock excludes 21 MT of rice receivable from millers. The stock is against the buffer of 41.12 MT for July 1.
FCI has projected a food security expenses of Rs 1.43 lakh crore for FY26 against the total food subsidy budget of Rs 2.03 trillion.
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 that 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.
Officials said out of total borrowing of FCI at Rs 51,670 crore by the end of December, FY25, a major chunk includes Rs 36,700 crore worth of bonds which are payable during 2028-30 in parts.
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.