The central government has announced a significant increase in its authorized capital from Rs. 10,000 crores to Rs. 21,000 crores in a move to enhance the financial stability of the Food Corporation of India (FCI). This decision, revealed through a notification from the food ministry issued on Friday, will provide the government-owned firm with additional equity capital crucial for managing its substantial food grain stock.
A senior official from FCI, speaking anonymously, emphasized the positive implications of this capital infusion, stating that it would enable the corporation to reduce its reliance on borrowings from banks and other financial institutions. This move is projected to result in an annual saving of Rs. 750 crores for FCI.
As the primary grain-handling agency of the central government, FCI plays a pivotal role in distributing grains to approximately 800 million people across the nation. The corporation shoulders significant expenses, particularly in procuring wheat and rice from farmers at minimum support prices (MSP), along with costs associated with storage and transportation.
The financial burden on the exchequer for providing free grains under the National Food Security Act (NFSA) has been substantial, with an estimated cost of Rs. 1.97 trillion for the fiscal year 2023–24. To fund these operations, the government disbursed a subsidy amounting to Rs. 1,67,875 crores to FCI between January 1, 2023, and December 15, 2023.
In recent years, FCI has experienced relative financial comfort due to the prompt release of food subsidy amounts by the government. This trend followed the cessation of the practice of obtaining loans from the National Small Savings Fund (NSSF) for subsidy financing, initiated in the FY22 Budget to enhance fiscal transparency.
The government’s decision to augment FCI’s authorized capital marks a significant step in ensuring the corporation’s financial resilience and its ability to fulfill its mandates effectively. Established under the Food Corporations Act, 1964, FCI is entrusted with implementing the food policy of the Indian government, including ensuring MSP for farmers, maintaining buffer stocks of food grains, and distributing food grains under various welfare schemes, including the National Food Security Act.