The central government has increased the authorised capital of the Food Corporation of India (FCI) from Rs 10,000 crore to Rs 21,000 crore, according to a notification issued by the Ministry of Food on Friday. This move aims to provide additional equity capital to support the foodgrains stock held by the government-owned firm.
What is FCI and why is it important?
The FCI is the main grain-handling agency of the central government, which utilises the food subsidy to provide grains to 800 million people under the National Food Security Act (NFSA) and other welfare schemes. The FCI incurs most of its expenditure on account of the minimum support price (MSP) given to farmers for the procurement of wheat and rice, their storage, transportation and related activities.
The FCI plays a vital role in ensuring food security and price stability in the country. It also helps in stabilising the market prices of foodgrains and protecting the interests of farmers and consumers.
How will the increase in authorised capital help FCI?
The annual cost to the exchequer for providing free grains under NFSA was estimated at Rs 1.97 trillion for 2023-24, which the centre allocates to the FCI as food subsidy. During the period between January 1, 2023 to December 15, 2023, the government has released a subsidy amount of Rs 1,67,875 crore to the FCI as food subsidy.
The increase in authorised capital will enable the FCI to raise more equity from the government and reduce its dependence on borrowings from banks and other institutions. This will help the FCI in saving interest costs and improving its financial health.
The corporation has been relatively comfortable in recent years with the cash position as the government has been promptly releasing food subsidy amounts, after the practice of taking National Small Saving Fund (NSSF) loans for subsidy financing was stopped in the FY22 Budget for the sake of fiscal transparency.
What is the history and objective of FCI?
The government had increased the authorised capital of FCI in 2019 from Rs 3,500 crore to Rs 10,000 crore. FCI was constituted under the Food Corporations Act, 1964, to implement the food policy of the government of India. Its primary objective is to ensure MSP to farmers, maintain buffer stock of foodgrains and distribution of foodgrains under NFSA and other welfare schemes.
“This will help the FCI in reducing its borrowings from banks and other institutions, leading to a saving of Rs 750 crore annually,” said a senior official of FCI without wanting to be named.
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