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With the finance ministry releasing over Rs 70,000 crore or 45% of the budgeted food subsidy of Rs 1.52 lakh crore for 2026-27 to the Food Corporation of India (FCI) so far, rising economic costs of carrying surplus food grains could be curbed.
A “wage and means” advance of Rs 50,000 crore has helped the corporation to met working capital requirements.
The finance ministry has been releasing expenses towards food subsidy in a timely manner in the last couple of fiscal years, which has ensured that the FCI don’t rely heavily on short-term loans and cash credit limits as provisioned.
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 the free ration scheme, and for maintaining a buffer.
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FCI currently holds 87.38 million tonnes (MT)—39.6 MT of rice and 47.7 MT of wheat. The stock is against the buffer of 30.77 MT for October 1.This stock excludes 22 MT of rice receivable from millers.
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.
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 to Rs 43.91/kg and Rs 31.45/kg, from Rs 42.11/kg and Rs 29.68/kg, respectively, in FY26.
Sources said that against the budget estimate of Rs 2.27 lakh crore (including allocation to FCI and for states that opted for the decentralised procurement system) in 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. As per the budget estimate for last fiscal, the food subsidy was projected at Rs 2.03 lakh crore.
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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% and 7.4% per annum. In terms of debt, FCI has issued Rs 36,700 crore worth of bonds so far, payable during 2028-2021.
Under PMGKAY, 810 million people are currently being provided 5 kg each of specified grains per month free of cost. The free ration scheme is being extended till the end of 2028 and it would cost the exchequer Rs 11.8 trillion.
TOPICSfood subsidyThis article was first uploaded on September seventeen, twenty twenty-six, at twenty-nine minutes past seven in the evening. © The Indian Express (P) Ltd