With an increase in foodgrains provided by the FCI under various government schemes, the debt is likely to go up in the Revised Estimate.
Despite the ballooning of debt over the years, the Food Corporation of India (FCI) has managed to bring down its outstanding debt to Rs 45,572 crore as on December 31, 2021, eight times lower than the amount reported on the same date in FY 2020-21, a report by the Centre for Policy Research recently found. However, with an increase in foodgrains provided by the FCI under various government schemes, the debt is likely to go up in the Revised Estimate (RE).
“Allocations of foodgrains increased significantly in FY 2020-21 and FY 2021- 22 owing to the additional allocations made under PMGKAY (Pradhan Mantri Garib Kalyan Anna Yojana) and other pandemic relief measures. With the extension of PMGKAY into its fifth phase, estimated foodgrain allocations for FY 2021-22 are at a record high of 981 lakh tons, 79 per cent higher than FY 2019-20,” the report said.
Over the last two years, the Ministry of Consumer Affairs, Food and Public Distribution Allocations (MoCAF&PD), under which the FCI falls, has seen a significant increase in allocations. Between FY 2019-20 RE and FY 2020-21 RE, the government allocations to the MoCAF&PD saw a four-time increase.
In FY 2021-22, the Budget Estimate (BE) for the ministry stood at Rs 2.43 lakh crore. However, despite an additional allocation of Rs 46,513 crore through supplementary budgets, it was still 32 per cent lower than the previous year's RE.
“FCI’s debt has reduced because it has been taken under the budget. Earlier, FCI’s borrowing was happening outside the budget. This understated the food subsidy amount earlier. To make things more transparent, the government corrected it last year. That means that now it won’t be the FCI taking on the debt, but the government. Since FCI has no source of revenue, the only way it could repay debt was when the subsidy was paid out. Now, FCI’s debt would be borne by the government directly,” explains Madan Sabnavis, chief economist, Bank of Baroda.
Food subsidy is the largest scheme run by the MoCAF&PD and at the beginning of FY 2020-21 BE, the government had allocated Rs 1.16 lakh crore for the same. It was later increased by more than three times in the RE and eventually stood at Rs 4.23 lakh crore.
As of November 2021, the coverage of eligible beneficiaries under the National Food Security Act (calculated using the projected population for 2021) was 87 per cent. On March 26, 2020, in light of the Covid-19 pandemic, the central government announced PMGKAY which made provisions for free additional foodgrains to eligible beneficiaries. Since then, five phases of the scheme have been announced with the latest PMGKAY-V being implemented over a period of four months — December 2021 to March 2022.
“This increase was due to two reasons. First, as part of GoI’s effort to provide free ration to citizens under the COVID-19 relief packages of PMGKAY and Atmanirbhar Bharat Package (ANBP). Second, was due to a one-time pre-payment of around Rs 1.5 lakh crore of food subsidy to FCI for an outstanding loan,” the report said.