FCI raises Rs 20,000 cr short term loan to meet cash needs

It is facing problems in operations due to non-payment of food subsidy around Rs 40,000 crore by govt

Faced with liquidity crunch, the Food Corporation of India (FCI) has raised Rs 20,000 crore as short term loan to meet its working capital requirements.

FCI, the nodal agency for procurement and distribution of foodgrain, has entered into an agreement with a consortium of 62 banks for raising Rs 20,000 crore, which it will avail of in January.     

It is facing problems in operations due to the non-payment of food subsidy around Rs 40,000 crore by the government.

"We have raised Rs 20,000 crore from a consortium of 62 banks but we can avail this amount only in January next year after utilising our full cash credit limit," said an official source.     

Banks offer short term loans at the base rate, with the pay back period varies from 30-120 days, sources added.     In order to ensure smooth procurement operations, FCI has a cash credit limit of about Rs 55,000 crore with a consortium of 62 banks which is secured by mortgaging stocks.     

The subsidy dues with the government have risen to around Rs 40,000 crore, from Rs 32,000 crore at the start of this fiscal, he added. In the Budget 2013-14, Finance Ministry allocated Rs 90,000 crore for the food subsidy, of which Rs 10,000 crore was earmarked for the implementation of the food security law, enacted in early September this year.     

The bulk of the food subsidy is paid to FCI for running the public distribution system (PDS). Operation costs of FCI have risen sharply in the last few years due to increase in the minimum support prices (MSP) of grains as well as high storage costs.     

During the last fiscal, 2012-13, FCI had raised Rs 5,000 crore through issuing bonds. For 2013-14, it has proposed to raise long term bonds for up to Rs 8,000 crore.