With the finance ministry releasing over Rs 58,000 crore or 33% of the budgeted food subsidy of Rs 1.78 lakh crore for FY27 to the Food Corporation of India (FCI) so far, officials said rising economic costs of carrying surplus food grains could be curbed.
Allocation of food subsidy to FCI is largely used for supplying free rice and wheat to over 800 million people under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) or free ration scheme.
FCI currently holds 90.49 million tonne (MT) — 40.88 MT of rice and 49.6 MT of wheat. This stock excludes 24 MT of rice receivable from millers. The stock is against the buffer of 41.12 MT for July 1.
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The finance ministry has been releasing expenses towards food subsidy timely in the last couple of fiscal years, which has ensured that corporations mostly don’t rely heavily on short-term loans and cash credit limits as being provisioned.
In addition, the finance ministry has agreed to reimburse around Rs 15,000 crore worth of subsidy annually to FCI for supplying rice for ethanol production and state schemes below the economic costs of the grain.
With rising minimum support price (MSP), carrying cost, storage and other costs, the FCI’s economic cost for rice and wheat for 2026-27 is estimated to increase Rs 43.91/kg and Rs 31.45/kg, from Rs 42.11/kg and Rs 29.68/kg respectively in FY26
More than 70% of the centre’ food subsidy budget is allocated to FCI for procuring foodgrains under the MSP operations from farmers and distributing them to states for the free ration scheme. The rest of the food subsidy component is routed through states that opted for a decentralised procurement system.
Sources said that against the budget estimate of Rs 2.27 lakh crore for FY27 towards food subsidy, the actual outgo may exceed Rs 2.47 lakh crore if central pool grain stocks continue to mount. As per the revised estimate for FY26, the food subsidy expenditure was Rs 2.27 lakh crore, of which Rs 1.69 lakh crore was routed through FCI.
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To bridge cash-flow mismatch, FCI has a provision to avail a short-term loan of up to Rs 1 lakh crore at any given point, with a tenure of 90 days. The annual rate of interest charged by designated banks ranges between 5.55% to 7.4% per annum. In terms of debt, FCI has issued Rs 36,700 crore worth of bonds so far, payable during 2028-2021.
Annually, the corporation supplies around 36 – 38 MT of rice and 18 – 20 MT of wheat under the free ration scheme while procurement has been in the range of 80 – 85 MT for the last many years leading to piling up of stocks.
TOPICSfood subsidyThis article was first uploaded on August nine, twenty twenty-six, at forty minutes past six in the evening. © The Indian Express (P) Ltd