With the finance ministry releasing Rs 1.26 lakh crore or 86% of total estimated food subsidy of Rs 1.47 trillion estimated for FY25 to the Food Corporation of India (FCI) upfront, the corporation has not availed the expensive route of seeking short terms loans or avail its cash credit limit to finance its activities in the current fiscal.
Sources told FE with these funds and around Rs 6,000 crore of unspent subsidy allocated to FCI under in FY24 is carried forward into current fiscal at its disposal, the corporation would not have to rely on short-term loans and cash credit limits as being provisioned.
Officials said the finance ministry has provided for the most of subsidy expenses two months ahead of end of the current fiscal. FCI has projected a food subsidy expenses of Rs 1.55 lakh crore for 2025-26.
“Despite the FCI currently holding grain stocks more than 3 times buffer, upfront release of food subsidy has helped not utilised the provisions for borrowing in case of short fall or delay in subsidy flow,” an official said.
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 has ensured that corporations mostly don’t rely on short-term loans and cash credit limits as being provisioned.
The FCI currently holds 49.37 million tonne (MT) — 32.36 MT of rice and 17 MT of wheat. This stock excludes 34 MT of rice receivable from millers. The stock is against the buffer of 21.41 MT for January 1.
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.
Correspondingly 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.
To bridge cash-flow mismatch, 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 6.98% to 7.36% per annum.
Officials said out of total borrowing of FCI at Rs 39,360 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.
The corporation has been relatively comfortable in recent years with the cash position 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 the FY22 Budget for the sake of fiscal transparency.
The FCI in collaboration with state agencies procures and distributes more than 55 MT of wheat and rice annually under PMGKY through 530,000 fair price shops across the country.