Govt to invest Rs 50 bn in Food Corporation of India in 2 years: Parl panel

The government will infuse Rs 50 billion equity in state-run Food Corporation of India (FCI) over the next two years to ease liquidity problem and make its procurement operations more efficient.

FCI, the government's nodal agency for procurement and distribution of foodgrains, will also raise Rs 320 billion through government-guaranteed bonds, according to a Parliamentary panel's report.

The Parliamentary Standing Committee on Food and Public Distribution, headed by J C Divakar Reddy, took a note of the budget proposal to restructure the FCI capital in order to enhance equity and to raise long-term debt for meeting the working capital requirement.

"The Ministry of Finance has accordingly decided that the capital requirement for holding the stocks shall be pegged at Rs 500 billion, of which Rs 450 billion shall be financed through borrowed capital and Rs 50 billion through equity infusion," the panel said in the report.

The equity of Rs 50 billion will be infused in FCI over two years. As FCI is already holding bonds worth Rs 130 billion, the Corporation would further raise Rs 320 billion through government-guaranteed bonds, the panel added.

"The committee hope that with the infusion of more capital, the FCI....would be able to improve forming its mandate while discharging its function."

Since FCI is established under a special Act of Parliament and does not come under a Company Act, the Corporation's capital is in the form of equity and is not divided into shares.

The committee also asked FCI to take steps for expeditious settlement of its outstanding dues from various central ministries to prevent undue burden on food subsidy bill.

Stating that the outstanding dues to FCI are very high, the panel said the Rural Development Ministry owe Rs 24.5 billion, while the HRD Ministry's dues stood at Rs 2.48 billion as on December 31, 2017 and the External Ministry owed Rs 479 million till date.

FCI's primary duty is to undertake purchase, storage, movement, transport, distribution and sale of foodgrains. It purchases foodgrains at government announced rate and supplies to states for the public distribution system at subsidised rates.