NEW DELHI: The Food Corporation of India (FCI) may raise around Rs 15,000 crore through short term loans in the current fiscal to bridge the gap between food subsidy allocated and actual expenses in handling and distribution of grains under free ration scheme.
Sources told FE that as a cabinet nod for the increasing authorised capital of the FCI to Rs 21,000 crore from the Rs 10,000 crore is yet to be received, the corporation may seek short term loans to finance its activities of procurement and distribution of foodgrains to states.
As per the revised estimates for 2023-24, out of the total allocation of Rs 2.11 trillion under the food subsidy expenses, Rs 1.39 trillion is routed through FCI. Sources said that so far the finance ministry has allocated Rs 1.25 trillion under the food subsidy expenses to FCI.
An additional expenses of around Rs 11,000 crore by FCI is projected in the next couple of weeks.
In the first half of the current fiscal, FCI had availed short-term loans of Rs 6940 crore, which has been paid back. “Additional requirements of short term credit may arise by the end of the month ,” an official said.
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 7.25% to 7.95% per annum.
Recently, the government has increased the authorised capital of the FCI, a move in sync with the policy of minimising borrowings by the corporation, through which close to 70% of the food subsidy budget is routed.
While the food subsidy is essentially the difference between the economic costs of the National Food Security Act grains for the government and the issue (retail) prices to the beneficiary consumers(which is currently provided free of cost), the loss-making operations are undertaken by FCI and other government agencies.
Officials said out of total borrowing of FCI at Rs 54,749 crore by the end of September, FY24, 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.
Correspondingly the FCI’s economic cost for rice and wheat for 2023-24 is estimated to increase Rs 39.18/kg and Rs 27.03/kg, from Rs 35.62/kg and Rs 24.67/kg respectively in 2021-22
The FCI in collaboration with state agencies procures and distributes more than 55 million tonne (MT) of wheat and rice annually under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) also known as free ration scheme through 530,000 fair price shops across the country. The government has extended PMGKAY where 813 million people are currently being provided 5 kg each of specified grains per month free of cost, by five years till 2028.
Source: The Financial Express