FCI resorts to short-term loans again and raises Rs 22,000 crore

The Food Corporation of India (FCI) has been granted a short term loan of Rs 22,000 crore in the current financial year to finance its operations due to insufficient provisioning of food security expenditure by the Ministry of Food. Finance.

Sources told FE that against spending over Rs 75,000 crore for the current financial year, the Ministry of Finance has so far allocated about Rs 52,000 crore to the food subsidy budget. During the current month, the ministry has not allocated any funds for food security expenditures to the FCI.

Also Read: Leading Economists See Economy Falling 13-15.7% in Q1

The company was relatively comfortable with its cash position in FY22 as the government quickly released food subsidy monies, after ending the practice of taking loans from the National Small Savings Fund (NSSF) for grant funding in the FY22 budget for budget transparency.

The Society may seek more short-term loans if the ministry does not release the funds quickly. He has already secured a loan amount of Rs 75,000 crore sanctioned by banks.

The ministry has also provided Rs 10,000 crore in the current financial year as salaries and means progress which are adjusted against the food subsidy budget by the end of the financial year.

FCI uses short-term loans, lasting 90 days, from regular banks to address cash flow mismatches due to insufficient release of food subsidies by the Ministry of Finance.

Raising more short-term loans would have pushed up FCI’s spending due to an increase in interest outflows. These short-term loans carry an interest rate of between 3.85 and 5.5% per annum.

Meanwhile, several ministries such as rural development, education and external affairs are awaiting the payment of dues of around Rs 2,900 crore to FCI against the grain provided for various social welfare schemes.

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. The remainder of the food subsidy is channeled directly to states following a decentralized procurement system.

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

Also Read: Jackson Hole Symposium This Week: US Fed Chair Powell May Continue to Focus on Inflation Even if It Means a Recession

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 taking loans from the National Small Savings Fund (NSSF) for grant funding was stopped in the FY22 budget for transparency reasons. .

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. In contrast, the FCI economic cost (minimum support price to farmers, storage, transport and other costs) of rice and wheat for 2022-23 is Rs 36.70 and Rs 25.88 per kg, respectively.

FCI buys and distributes more than 60 million tons 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 welfare programs.

Due to a huge mismatch between the increase in expenses due to the unlimited supply of rice and wheat from farmers under minimum support price operations and the cost of maintaining 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 a food subsidy.

Finance Minister Nirmala Sitharaman, in her budget speech for 2021-22, had announced an end to the practice of off-budget borrowing from the next fiscal year by making provisions of Rs 3.35 trillion for the payment of NSSF loans .