The Food Corporation of India (FCI) will raise Rs 50,000 crore in short term loans from banks next month to fund its operations due to insufficient release of food subsidy expenditure from the Centre.
Sources told FE that against a request of around Rs 47,000 crore for expenditure from April to June 2022, FCI has so far only received around Rs 33,000 crore under the grant budget. food.
The company has been relatively comfortable with the cash position over the past year as the government quickly released food subsidy monies after the practice of using loans from the National Small Savings Fund (NSSF) for grant funding was discontinued in the FY22 budget for the sake of fiscal transparency.
Sources have said that after availing the short-term loan in early July, FCI will deploy around Rs 24,000 crore for repayment of the short-term loans utilized in the first two months of the current financial year. These loans were used to finance FCI’s foodgrain procurement, transportation and distribution operations to the states for the public distribution system.
The CFI is mandated to obtain short-term loans of 90 days duration from the planned banks to address cash flow mismatches due to the slow release of grants. These short-term loans carry an interest rate of around 3.85 to 3.9% per annum.
The Ministry of Finance paid Rs 10,000 crore as an advance on wages and means to FCI this quarter which had to be adjusted based on the release of the food subsidy by March 31, 2023.
The central issue prices of Rs 3, Rs 2, Rs 1 for one kg of rice, wheat and coarse grains respectively, under the National Food Security Act (NFSA), have not been revised since 2013. In contrast, the economic cost of FCI (MSP to farmers, storage, transport and other costs) of rice and wheat for 2022-23 is 36.70 and25.88 per kg, respectively.
For 2022-2023, the central government has allocated Rs 2.06 trillion for food subsidy expenditure, of which Rs 1.45 trillion or 71% is provided to FCI. However, following the extension of Pradhan Mantri Garib Kalyan Anna Yojana, an additional Rs 800,000 will be spent under food subsidy.
FCI purchases and distributes over 60 million tonnes (MT) of wheat and rice per year. The company manages the procurement, storage and transportation of rice and wheat to states for distribution, primarily for NFSA and other social welfare programs.
Due to a huge mismatch between the increase in expenses due to the unlimited supply of rice and wheat under minimum support price (MSP) operations to farmers and the cost of storing excess stocks between 2016-17 and 2020-21, the government had provided it with funds from loans taken from the NSSF from 2016-17 to 2020-21 in lieu of food subsidies.
However, Finance Minister Nirmala Sitharaman, in her Budget speech for 2021-22, had announced an end to the practice of off-budget borrowing next fiscal year by making provisions of Rs 3.35 trillion for the payment of NSSF loans. .
