NEW DELHI, July 28: Forced by rising food subsidy arrears, the Food Corporation of India has raised Rs 20,000 crore for the second time this fiscal to continue the smooth procurement and distribution of foodgrains.
The loan has been raised from various banks at interest rates in the range of 9.95-10.25 per cent, sources said.
In the recently floated tender on July 15, the FCI said: “To meet out its short-term fund requirement for procurement and distribution of food grains, the corporation is considering raising short-term loans from the scheduled banks only for 90 days tenure.”
In April, FCI had floated a tender for the same amount and raised it from around 20 banks at interest rates in the range of 10.19-10.25 per cent.
In 2013-14, the government had provided Rs 75,500.02 crore as subsidy to the FCI, while subsidy incurred during the year stood at Rs 1,03,791.85 crore. The total subsidy arrears, including carried over from previous years, amounted to about Rs 50,000 crore.
The arrears are estimated to touch Rs 68,000 crore by the end of the current fiscal as against the demand of Rs 1,10,000 crore. The government has allocated Rs 92,000 crore as food subsidy to the FCI for 2014-15.
Sources said the Corporation has no other option but to raise short-term funds for its procurement and distribution operations.
Besides arrears, the delay in subsidy payments is also forcing the nodal agency for raising funds.
In the tender, which closed on July 24, the minimum quote was fixed at Rs 250 crore and tranche size at Rs 20,000 crore, while in response the bank got bids for more than Rs 45,000 crore.
The Corporation takes short-term loans from various scheduled commercial banks normally at base rate.
Meanwhile, in the tender FCI had clarified, “Neither the government of India guarantees nor any other security is available for this short-term loan and this would be an unsecured one.”
Apart from short-term loans, the FCI has a cash credit limit of Rs 54,495 crore, which it can avail of from the consortium of 62 banks against foodgrains stocks lying in its godowns.
It has already utilised the cash credit limit.
Last fiscal, 2013-14, FCI had raised Rs 8,000 crore from the market through long-term bonds.
FCI’s subsidy has risen sharply in the last few years due to increase in the minimum support prices (MSP) for wheat and rice as well as high procurement, storage and distribution costs.
The economic costs comprising MSP, procurement, storage and distribution for wheat stood at Rs 1,494.35 per quintal and that of rice were at Rs 1,983.11 per quintal in 2010-11.
In 2013-14, economic costs of both wheat and rice went up to Rs 1,932.39 per quintal and Rs 2,638.54 per quintal respectively. (PTI)
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