Food Corporation of India under High Debt Stress of 2.65 Lakh Crore

Food Corporation of India (FCI) is facing a debt of 2.65 lakh crore. The FCI is responsible for regulating pricing on food, storage, and maintenance of adequate stock, and food grain distribution throughout the nation. FCI is completely reliant on the central government for funding. The debt exaggerated from 91,109 crores in 2013 to 2.65 Lakh Crore in 2019.

National Small Savings Fund (NSSF) Loan

The probable cause of which is credit derivation from the National Small Savings Fund (NSSF). This escalation is estimated to have started during the year 2016. Debt from NSSF was nil on April 2016 and by March 31st 2017 it stood at 70,000 crores. Currently, FCI owes 1.91 lakh core to NSSF.

Government’s Low Budget for FCI

The FCI procures at a high cost and vends at a low cost. Thus, requiring financial assistance to ensure their proper functioning. The government allocates a portion of capital aiding in the linkage of the slit between the actual market price of the food grain and the minimum support price.

Procurement by Food Corporation of India (FCI)

Besides that, the government also funds the distribution of food grains. However, in recent years, the management has cut off the FCI by denying their budget required for the food subsidiary. Hence, to reimburse the downfall FCI began to borrow from NSSF.

National Food Security Act, 2013

There has been Increase in the number of beneficiaries under food grain distribution system of FCI. Further, implementation of the National Security Act 2013 that aimed to provide subsidised food grains to two third of India’s population led to escalation of debt. In addition, reduction of rice and wheat sale price and increase in procurement prices of food grain under MSP led to high FCI debt situation.

Debt Pattern

Ideally, the losses must be reimbursed to the administration. Although it seems FCI had to derive money from banks against sovereign guarantee for the past 3 years. Considering the borrowing pattern, FCI’s debt pattern as on March 31st 2019:

Source of Finance Amount in INR (Crore)
Equity Capital subscribed by Government of India 3447.58
Cash Credit sanctioned by banks 8995.00
Government of India Guaranteed Redeemable Non – Convertible Bonds 15,737.70
Unsecured Short Term Loan Limit Sanctioned 50,000.00
Ways and Means Advance 12,000.00
National Small Saving Funds (NSSF) Loan 1,91,000.00
Total 2,81,180.28

As FCI has no income of its own to repay the debt, the government of India must provide the FCI the cash required to overcome the obligation.

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