FCI does not face payments crisis, says agriculture ministry

FCI does not face payments crisis, says agriculture ministry

Bangalore: The agriculture ministry said on Monday that the Food Corporation of India (FCI) does not face a payments crisis, and that all the budgeted money has been released. This was in response to a Mint story on the state-run agency seeking an urgent infusion of 38,000 crore to pay for grain purchases.

The problem, however, is not with subsidies budgeted for FCI. First, it is with arrears that have been mounting over the last six years and stand today at more than 11,000 crore, as Mint reported. Food subsidy defaults to FCI have grown 800% over the last six years, according to a March 2011 bulletin issued by the ministry of agriculture.

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Second, documents with Mint reveal that the food subsidy for 2009-10 was about 70,000 crore-Rs 10,000 crore more than the government officially states; in other words, hidden subsidies.

Third, 36,000 crore is the current gap between the budgeted figures and the expenses FCI will incur during 2011-12, as the finance ministry itself acknowledges, which is what Mint reported.

“We do have a problem, some amounts are pending," minister of state for food and public distribution K.V. Thomas had told the Hindustan Times last month. “I am myself taking up the issue with various government departments that have not made payments on time."

All this has left FCI with a serious cash flow problem. As we reported, FCI has twice over the past month had to stop payments to state agencies and rice millers.

In February, the non-payment of subsidies in March left FCI with less than 10 days of credit, and State Bank of India (SBI), which leads a consortium of 59 banks funding the nationwide movement of food, refused further credit, officials in the food and finance ministries had said on condition of anonymity.

In Mumbai, an SBI official, similarly refusing to be identified, confirmed that FCI chairman Siraj Hussain and his team visited the city about two months ago, seeking a short-term loan from the consortium, beyond the corporation’s government-secured credit limit of 35,000 crore.

The loan request was turned down since it would not be backed by a sovereign guarantee, the official had said. FCI eventually cobbled together “some money" from individual banks, he said.