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Adequate Subsidy Releases, But Cash Mismatch Persists
According to sources, the finance ministry is currently disbursing food subsidies of around Rs 11,000 in two monthly instalments to FCI to meet working capital requirements. As a result, sources said the corporation may not seek more short-term loans till September, a period considered a ‘lean’ in terms of procurement of food grains.
As on August 1, the FCI holds 72.63 million tonne (MT) — 38 MT of rice and 34.66 MT of wheat. This stock excludes 14 MT of rice receivable from millers. The stock is against the buffer of 41.12 MT for July 1.
Paddy procurement for 2025-26 season will commence from October 1, when the corporation needs to get additional subsidies.
Rising Procurement Driving Higher Costs
The FCI has projected food security expenses of Rs 1.43 lakh crore for 2025-26 against the total food subsidy budget of Rs 2.03 lakh crore. The rest of the food subsidy is routed through those states who have opted for decentralized procurement system.
To meet out cash flow mismatches and to provide temporary working capital to the corporation, there is a provision for the FCI to avail a short-term loan with a tenure of 90 days up to Rs 1 lakh crore at any given point of time. The annual rate of interest charged by designated banks ranges between 6.2% and 7.93% per annum.
Officials said out of the total FCI borrowing of Rs 60,563 crore by the first quarter of FY26, a major chunk includes Rs 36,700 crore worth of bonds which are payable during 2028-30 in parts.
More than 70% of the Centre’s food subsidy budget is allocated to FCI for carrying out the activities of procurement of foodgrains under the minimum support price (MSP) operations from farmers and distributing them to states for the free ration scheme.
Sources said that the finance ministry has been releasing expenses towards food subsidy on time over the last couple of fiscal years, which had ensured that corporations mostly did not rely on loans from National Small Saving Funds.
Annually the corporation supplies around 36 – 38 MT of rice and 18 – 20 MT of wheat under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) or free ration scheme while the procurement has been over 50 MT for the last many years leading to piling up of stocks.
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Officials said that for the last few years the agencies are buying over 76 MT of rice and wheat annually while the requirement under the PMFBY is around 56 to 58 MT.
“Higher procurement of grains against the requirements are adding up to economic costs despite the government liquidating some stocks through open market sale,” an official said.
Correspondingly, the FCI’s economic cost for rice and wheat for 2025-26 is estimated to increase to Rs 41.73/kg and Rs 29.80/kg, respectively, up from Rs 40.42/kg and Rs 28.50/kg in 2024-25.