The Food Corporation of India (FCI) is making strategic financial moves by calling for bids from scheduled banks to raise a short-term loan amounting to Rs 20,000 crore, aimed at alleviating its burgeoning subsidy arrears, which have surged to a staggering Rs 58,650 crore as of March 31.
The state-run FCI, in a tender document, stated its intention to procure a short-term loan with a greenshoe option, stipulating that the borrowing through this short-term loan will not exceed Rs 30,000 crore at any given time, specifically for a one-month or three-month maturity period.
With the last submission date for bids set for July 1, the FCI underscores the urgency in its need to bolster its financial liquidity to meet the substantial costs incurred in food grain procurement.
The Government had earlier indicated its willingness to consider additional food subsidies beyond the budgetary provision to curtail the subsidy arrears by the end of this fiscal year. The primary portion of the subsidy is directed to the FCI to support the acquisition of food grains at the minimum support price (MSP) and to sustain the public distribution system (PDS).
The escalating costs of PDS operations, largely due to the amplified MSP of grains and surging storage expenses, have significantly impacted FCI’s financial responsibilities in recent years.
Presently, the FCI has a cash credit limit of Rs 54,495 crore secured through a consortium of 67 banks. The government has allocated Rs 1,34,834.61 crore for food subsidies in the financial year 2016-17, with approximately Rs 1.03 lakh crore earmarked for FCI.
In the previous fiscal year (2015-16), the government initially allocated Rs 97,000 crore to FCI, later revised to Rs 1,12,000 crore. In the ongoing fiscal year, the government has disbursed Rs 25,834 crore as food subsidy to the corporation, in addition to another Rs 10,000 crore as a wage and means advance.
Established under the Food Corporation Act of 1964 to execute the food policies of the Government of India, FCI operates with full ownership by the Government of India and a paid-up capital of Rs 2,830.49 crore.
The call for a substantial short-term loan reflects FCI’s proactive measures to address the looming subsidy arrears and secure its financial stability in fulfilling its crucial role in India’s food distribution network.
