Rising grain stocks and lack of storage is one of the multiple issues facing India’s main grain supply agency, the Food Corporation of India (FCI). A bigger and more acute problem is its strained financial situation which, if not dealt with promptly, could have serious implications for the functioning of FCI.
Although grain supply operations may not be affected as funds for the purchase of rice and wheat would continue to be provided, several experts said, the financial health of the company could deteriorate if corrective measures are taken. immediate are not taken.
Such is the poor financial health of the FCI, officials said, that even if the Center released all its allocated grants for 2019-2020, then also by March 2020 the FCI would still have Rs 174,000 crore in dues. unpaid and approximately Rs 145,000 crore as outstanding of the National Small Savings Funds (NSSF) by the end of the 2019-2020 fiscal year.
In March 2019, this number was Rs 191,000 crore of unpaid contributions and an amount equal to that of the outstanding loans of the NSSF.
At the start of the 2019-2020 fiscal year, FCI requested Rs.186,000 crore as a grant, including rupee 46,000 crore for principal repayment.
However, the total allocation under the budget was Rs 151,000 crore (the food subsidy allocated in 2019-2020 was Rs 184,000 crore of which FCI’s share is Rs 151,000 crore while the rest is the share. State for supply operations), already leaving a gap of Rs 35,000 crore even before the start of full-year operations. After adding in unpaid dues and other liabilities, the total unpaid grants at the end of 2019-20 are expected to rise to 174,000 crore rupees, officials said.
Long before the Center drew on RBI reserves to fill its budget deficit, it did the same with NSSF funds to manage its food subsidies (since 2016-17). Prior to that, excess food subsidies were carried over and reflected in the budget for the following year.
But, due to open procurement operations and a capping of the issue, the subsidy continued to increase as allocations were less onerous for the government to apply for loans from the NSSF which must be repaid in five years.
At the start of 2016-17, the required FCI grant was Rs 110,000 crore, but the actual outflow from the Center during the year was only Rs 78,000 crore. The balance was loaned by NSSF, amounting to Rs 32,000 crore. During the year, as grant requirements increased, so did NSSF loans. As a result, this number rose to Rs 70,000 crore at the end of 2016-17.
Likewise, in 2017-18, the actual grant required by the FCI was Rs 117,000 crore, while the actual disbursement during the year was Rs 62,000 crore, so NSSF loans from about Rs 55,000 crore was needed. But, over the course of the year, more funds were requested from the NSSF which, along with interest and other demands, pushed the total outstanding loans at the end of 2017-18 to Rs 121,000 crore. . By the end of 2018-19 (the latest year available), that number had risen to Rs 191,000 crore.
Besides NSSF loans, FCI has also raised loans from a mix of bonds, cash credit limits from banks, and short-term credit. Interest on them is also added to the government grant account.
Thus, at the end of 2018-19, when the NSSF loans were in progress to the tune of Rs 191,000 crore. Total outstanding loans amounted to over Rs 240,000 crore, of which NSSF loans contributed the most. From the 2019-2020 financial year, FCI will have to start repaying part of the principal, which according to some estimates is expected to be around Rs 46,000 crore.
Imagine this, just a month before the Food Corporation of India (FCI) started purchasing rice in October, grain stocks at Chhattisgarh were 102% of capacity, 99% of capacity at Jharkhand, 96% of capacity. ability in Punjab and Haryana.
All of the states mentioned above are major rice-buying states and just a month before their annual purchases for 2019, their stockpiles were chock-full of stocks accumulated over the years.
As of September 1, India had food grain stocks of over 67 million tonnes, while storage available as of July 1 was around 88 million tonnes. Of this total, about 14.5 million tonnes were in the basement of the covered area (CAP).
Now, with new purchases starting this month, serious action needs to be taken to build storage capacity.
The reluctance of the Center to increase the price of highly subsidized food grains provided under the NFSA, 2013. By law, the price of rice has been kept unchanged at Rs 3 per kg, while that of wheat has remained unchanged. unchanged at Rs 2 per kg and that of coarse grains at Rs 1 per kg.
Data shows that every 1 rupee (per kg) increase in the grain issue price could result in food subsidy savings of more than 5,000 crore rupees per year.
For 2018-19, while the issue price of CFI cereals to states under the NFSA remains at Rs 3 per kg for rice and Rs 2 per kg for wheat, the economic cost of cereals is respectively of 33.1 Rs and 24.45 Rs per kg. This means that for every kilogram of rice sold in the more than 500,000 ration shops across the country, the government receives a subsidy of Rs 30 per kg, while for wheat it incurs a subsidy of Rs 22.45 per kg. kg.
But, according to senior FCI officials, a bigger problem is the indefinite supply system which has created a large gap between grain purchased and grain sold.
Selling on the open market is an option, but quantities are small to significantly reduce inventory and reserves.
Food grain stocks (with Food Corporation of India (FCI) against buffer standards (in millions of tonnes)
Source: FCI, all figures are in millions of tonnes,, * as of September 1, 2019.
Food grain withdrawal (by States for the implementation of the NFSA) vs Purchases (in millions of tonnes)
NOTE: 2018-19 data is through end of August.