FCI will have just Rs 59K cr of NSSF loans by FY22-end: Expenditure secy

Lower loans will decrease FCI's interest burden by Rs 17,000-18,000 crore annually, say officials

With the Budget allocating Rs 4.23 trillion as food subsidy in FY21 and topping it up with another Rs 2.42 trillion for FY22, Food Corporation of India (FCI) will be left with just around Rs 59,000-crore unpaid loans by the end of next financial year, Expenditure Secretary T V Somanathan has said.

Explaining the maths, Somanathan said FY21 started with a Budget estimate of around Rs 1.2 trillion as food subsidy.

Another Rs 1.33 trillion was required for the Gareeb Kalyan package, which makes it about Rs 2.53 trillion.

He said the government could have provided just Rs 2.53 trillion, which would have taken care of the current year’s requirements and extra spending owing to the Garib Kalyan Package.

But by providing Rs 4.23 trillion, the Centre has repaid a considerable proportion of the NSSF (National Small Savings Funds) loans given to FCI in the past few years and now FCI will be left with loans of Rs 59,000 crore by the end of FY22. 

FCI sources said of the Rs 4.23 trillion allocated in FY21, around Rs 2.18 trillion will go towards servicing NSSF loans.

FCI took these loans to bridge the shortfall in budgetary allocations for food subsidy as Centre resorted to off-budget borrowings, largely from the NSSF. “In case there is any favourable surprise (on the revenue front), we’ll clear it at some point of time. But otherwise it’s almost wiped down to just Rs 59,000 crore from the earlier years,” Somanathan told Business Standard in an interview.

Top FCI sources said in FY21, of the allocated Rs 4.23 trillion food subsidy, FCI’s share was around Rs 3.44 trillion while the rest would be spent on paying states for decentralised procurement.

In decentralised procurement, states purchase, store, and distribute paddy and rice, while the Centre meets the cost at a pre-determined rate.

Of the Rs 3.44 trillion, around Rs 2.18 trillion will be to repay outstanding loans from the NSSF, which will mean that around Rs 1.26 trillion will be left. Here the next financial year’s allocation of Rs 2.42 trillion will come into play.

Sources said of the Rs 2.42 trillion for FY22, FCI’s share is around Rs 2.03 trillion while the rest is to be paid for decentralised procurement.

In this, Rs 2.03 trillion, FCI’s requirement for FY22 is around Rs 1.54 trillion while the remaining Rs 48,616 crore will be on the pending NSSF loans of Rs 1.20 trillion, leaving a very small amount on its books if the Centre further expands the scope of providing funds.

This will help FCI in lowering its interest cost by around Rs 17,000-18,000 crore annually, which will bring down the economic cost, which has gone up on account of the loan burden.

A lower economy cost will have implications for food subsidy calculations for FCI, because according to some estimate, in FY21 almost 6 per cent of the economic cost of rice and wheat was on account of interest on loans taken by it.