The government has increased the authorised capital of state-run Food Corporation of India (FCI) from Rs 10,000 crore to Rs 21,000 crore.
The move will help the FCI reduce its borrowings from banks and other institutions, leading to a saving of around Rs 750 crore annually, sources said.
The government procures grains under the National Food Security Act and sells it at a lower price to beneficiary consumers. These loss-making operations are undertaken by the FCI and other government agencies.
These operations are funded out of the Union budget, but sometimes there are delays in the release of budgetary funds.
In such situations, the FCI has to borrow from the market/NSSF to continue the operations without any disruptions. The interest on these loans adds to the food subsidy expenditure.
According to Interim Budget 2024-25, presented in the Lok Sabha by finance minister Nirmala Sitharaman, an amount of Rs 2,05,250 crore has been earmarked for food subsidy in the next fiscal.
This is lower than the revised estimates of Rs 2,12,322 crore for the fiscal ending March 31, 2024.
The food subsidy bill was Rs 2.72 lakh crore in 2022-23.
The FCI is the central government’s nodal agency that undertakes the procurement of foodgrains at a minimum support price (MSP) to protect the interest of farmers. It also maintains strategic stocks and distributes the grains under different welfare schemes.
“The increase in authorised capital is a significant step towards enhancing the operational capabilities of the FCI in fulfilling its mandate effectively,” the ministry said in a statement.
The FCI resorts to cash credit, short-term loans, ways and means to match the gap in the fund requirement.
The increase in the authorised capital will reduce the interest burden, decrease the economic cost and help the government subsidy programme positively, it said.
With this infusion of capital, the FCI should also embark upon modernising its storage facilities, improving transportation networks, and adopting advanced technologies.
