FoodMin for raising FCI's cash-credit limit

The food ministry is working on a proposal to raise the cash-credit limit of the Food Corporation of India (FCI) from Rs 35,000 crore to Rs 50,000 crore to enable the state-run foodgrain procurement agency access more funds from banks at cheaper rates. FCI is facing resource crunch due to high procurement.

Officials said they had held talks with representatives from the finance ministry. Food Ministry K V Thomas is also believed to have met Prime Minister Manmohan Singh to apprise him of the need to raise the cash-credit limit of FCI.

At present, FCI works through a cash-credit limit of Rs 35,000 crore which is provided by a consortium of 44 banks led by State Bank of India. The corporation’s authorised and paid-up capital is around Rs 2,500 crore and its borrowing cannot exceed 10 times its capital and reserve fund. According to an FCI official, banks charge penalty above Rs 35,000 crore of credit and if FCI overdraws, the interest outgo shoots up.

The fund requirement for FCI shot up as its annual procurement of grains grew manifold during the last few years, which has added on to its storage, warehouse and handling charges.

As on September 1, the government had almost 56.33 million tonnes of grains in its warehouses, much above the buffer and strategic requirement of 21.2 million tonnes.

Officials said holding such huge stock and further procurement put immense financial pressure on the corporation, which gets accentuated as states do not lift the additional quantities of grains allocated to them from time to time. In the Budget for 2011-12, the food subsidy has been estimated at Rs 60,085 crore, of which the corporation has already got Rs 23,636 crore.

But, as the procurement of grains has crossed record levels and storage also at record highs, the food subsidy is estimated at Rs 95,311 crore (this includes all expenses like that of grains allocated for the mid-day meal scheme) which will be released through supplementary demand for grants.

The fund requirement of FCI and state procuring agencies shot up mainly due to factors like announcement of bonus incentive of Rs 50 per quintal for wheat, raising of the MSP of paddy by Rs 80 per quintal and additional foodgrains allocations for above and below poverty line families.