A record harvest and, therefore, increased buying of grains by the Food Corporation of India (FCI) — the state grain-trading agency — has inflated its costs by 59%, the food ministry has said.
It, however, denied a financial crisis because of this.
The HT had reported on Monday that the FCI — critical to the nation’s food security because it buys grains for distribution to the poor at a discount — is on the brink of a payment crisis.
"Since the increased costs have been accounted for, there is no question of a financial crisis," a food ministry spokesperson said.
However, in February, payment delays had left the FCI with less than 10 days of credit.
The State Bank of India, which leads 59 other banks in financing the FCI's operations, declined further credit, documents with Hindustan Times show.
Over the past month, the FCI twice had to stop payments to state agencies and rice millers.
The food ministry, in a statement, said the FCI's expenditure estimates had increased from Rs60,084 crore to R95,311 crore. Of this, Rs23,635, or a quarter of the total requirement, has been released till July 21.
Documents with HT, however, show that the problem is not with allocations to the FCI but with arrears accumulating over the last six years, worth more than Rs11,000 crore.
Payment defaults have grown 800% over the last six years, according to a government document.
Documents also reveal that the food subsidy bill for 2009-10 was about Rs70,000 crore, or Rs10,000 crore more than the official estimate, pointing to hidden subsidies. All this has left the FCI with a serious cash-flow problem.
The FCI's finances would be strained even more as and when the proposed food security legislation is implemented.
Its procurement of grains then will have to go up to 62 million tonnes from 55 million tonnes currently, which will stretch its expenses further.