Govt approves Rs 5,000 cr working capital loan for FCI

The government today approved a short-term loan of Rs 5,000 crore for Food Corporation of India (FCI), which will help the organisation meet its working capital requirements this fiscal.

The proposal was cleared in the meeting of the Cabinet Committee on Economic Affairs (CCEA) held here.

"The CCEA today approved a short-term loan of Rs 5,000 crore to the FCI for 2010-11," an official statement said.

FCI, the nodal agency for procurement and distribution of foodgrains, will repay the loan in the next fiscal, it said.

The CCEA noted that this arrangement of financing (short-term loan) would be cheaper than the option of hiking the FCI's cash credit limit (CCL) to enable it to borrow more funds, as such loans would attract interest at the rate of 10.60% per annum.

CCL is a secured working capital loan given by banks on the basis of turnover, debtors, creditors and stock in hand.

At present, FCI has fully utilised the CCL of Rs 34,495 crore sanctioned by a consortium of banks for meeting its working capital requirements, the CCEA said.

Grant of the short-term loan of Rs 5,000 crore to FCI will enable it to carry out its mandated activities of procurement, storage and distribution of foodgrains as per government policy.