Food Corporation of India to raise Rs 20,000 crore short-term loan

(Reuters)
In order to meet out its short-term fund requirement for procurement and distribution of foodgrains, the Corporation is considering raising short-terms loans from the scheduled banks for one-month tenure.

State-run Food Corporation of India (FCI) has invited bids from the scheduled banks for raising a short-term loan of Rs 20,000 crore for one month period.

To meet out its short-term fund requirement for procurement and distribution of foodgrains, the Corporation is considering raising short-term loans from the scheduled banks only for one-month tenure, the FCI said in the tender document.

The FCI is raising short-term loan because its subsidy arrears have touched Rs 58,650 crore as on March 31, a source said.

"FCI intends to raise a short-term loan of Rs 20,000 crore with greenshoe option (the borrowing through STL will not exceed Rs 30,000 crore at any point of time) from scheduled banks for one-month maturity," the tender document added.

The tender was floated on April 13 and the last date for of submission of offer is April 26.

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Further, to bring down the subsidy arrear in this fiscal, the government had earlier said it may consider additional food subsidy over and above the budgetary provision, if required, towards the end of the current financial year.

The bulk of the subsidy is paid to FCI for buying foodgrains at support price and running the public distribution system (PDS).

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The PDS operation cost has risen sharply in the past few years due to an increase in the minimum support prices (MSP) of grains as well as high storage costs.

The FCI also has a cash credit limit of Rs 54,495 crore with a consortium of 67 banks.

The government has earmarked Rs 1,34,834.61 crore as food subsidy for the financial year 2016-17, out of which about Rs 1.03 lakh crore is for FCI.

While, in the 2015-16 period, the government had initially allocated Rs 97,000 crore to FCI, which was later increased to Rs 1,12,000 crore at the revised estimate stage.

In the current fiscal, the Centre has released Rs 25,834 crore as food subsidy to the corporation and another Rs 10,000 crore as a wage and means advance.

FCI was established under the Food Corporation Act 1964, to implement the food policies of the Government of India (GOI). FCI is fully owned by GOI having paid up capital of Rs 2,830.49 crore.

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