The Union government has sharply increased the working capital of the Food Corporation of India (FCI) for 2024-25 in a financial boost that will minimise borrowings and interest payouts, and fund a planned modernisation drive of the biggest grain-handling agency of the country, according to a notification seen by HT.
The government has raised the authorized working capital of the FCI to ₹21,000 crore from ₹10,000 crore, the biggest hike ever, which an official described as a “strategic step towards enhancing the operational capabilities of the FCI in fulfilling its mandate effectively”.
The FCI, a state-owned corporation through which 70% of federal food subsidies is routed, is critical to maintaining the country’s food security, as it buys millions of tonnes of farm produce at federally fixed minimum support prices (MSP), a process known as procurement.
The FCI then redistributes the food to 800 million poor people free of cost under the National Food Security Act, 2013, which is the world’s biggest food distribution operation. MSP is a floor price aimed to help avoid distress sale by farmers. The FCI also maintains emergency reserves of food and helps stabilize prices of essential commodities by selling subsidised items during periods of high inflation.
To address gaps in funding, the FCI often resorts to borrowing, such as cash credit and short-term loans. The fresh injection of working capital is aimed at reducing the FCI’s interest burden and the economic cost, which cost refers to expenses undertaken to buy, store and distribute free food.
{{/usCountry}}To address gaps in funding, the FCI often resorts to borrowing, such as cash credit and short-term loans. The fresh injection of working capital is aimed at reducing the FCI’s interest burden and the economic cost, which cost refers to expenses undertaken to buy, store and distribute free food.
{{/usCountry}}In 2022-23, the agency bought 76.56 million tonnes of rice and 26.2 million tonnes of wheat from about 12.3 million cultivators, paying them ₹2.19 lakh crore, according to official data. The cost is accounted for as the government’s food subsidy bill.
“Infusion of more capital will also help the FCI to embark upon modernizing its storage facilities, improving transportation networks, and adopting advanced technologies,” the official said, declining to be named. These measures are essential for reducing post-harvest losses.
The Centre provides equity to the FCI for working capital requirement and to creat infrastructure, a note seen by HT said. In recent times, the FCI is building an integrated IT system. A financial boost will help the digitization.
The FCI has spruced up its countrywide operations, introducing artificial intelligence-based equipment to detect fraud in its processes involving millions of farmers, a large network of transporters and silos. It is already a substantially less paper organization, with the implementation of e-office programme.
“These initiatives of integrated IT solutions serving as the core operational software for FCI shall provide a single source of information and streamline functions with a common digital backbone,” a food ministry note said.