Food subsidy: Govt to clear all FCI dues for FY22

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The ministry has allocated more than ₹1.45 lakh crores to FCI, against an estimated food subsidy budget of ₹2.28 lakh crores – including spending on PMGKAY – for 2021-22.

The finance ministry is bent on clearing almost all food subsidies of FCI of the current fiscal before the year-end. Despite an additional expenditure obligation of ₹1 lakh crores under PMGKAY or Pradhan Mantri Garib Kalyan Anna Yojana.

In 2021, the Central government closed its humongous off-budget liabilities to National Small Savings Fund (NSSF). Based on a decade-long mechanism FCI used to take loans from NSSF.

It`s done to end the cycle debt FCI is part of and to clear both its and the government`s balance sheet.

The ministry allocated an estimated ₹1.45 lakh crores on December 31, 2021, for the corporation. It is set against the 2021-22 food budget of estimated ₹2.28 lakh crores, which includes spending for PMGKAY.

The rest of the amount is provided to clear the balance sheet before March 31, 2022.

PMGKAY is a project launched in March 2020 to provide food aid during the pandemic. By this, an additional food grain of 5 kg per person per month will be supplied to more than 80 crore beneficiaries free of cost.

That is beside the highly subsidised food grains supplied under the National Food Security Act. This project will be implemented during May-March of 2021-22.

The less provisioning of the food subsidy for FCI against its expenses made the corporation take loans from various sources. These sources vary from NSSF, short term loans, bonds to cash credit limits as sanctioned by banks.

The crisis reached desperate levels at the end of 2019-20. That is when the debt of FCI rose to ₹2.43 lakh crores. That was against the ministry’s allocated amount of ₹75,000 crores to the corporations under the food subsidy budget.

In the revised 2020-21 budget estimate of ₹77,982 crores, the government has made an additional provision of ₹3.44 lakh crores under food subsidy expenses. This enabled them to pay back the debt to NSSF accumulated since 2016 worth ₹3.39 lakh crores.

Thus, the total interest expenditure of FCI of FY22 will be ₹4,153 crores against ₹29,068 crores of the previous fiscal.

Since the rise of MSP for paddy and wheat has increased the expenditure of the food subsidy. Another factor that led to the hike is the open-ended purchase operations which led to an accumulation of excessive grain stock in FCI.

The central issue prices of rice, wheat and coarse grains, under NFSA, has not been revised since 2013. This is contrasted to the FCI economic cost for rice and wheat for 2021-22.

The corporation is key in procurement, storage and transportation of rice and wheat to states for distribution. This is especially the case of NFSA and other welfare schemes.

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