FCI seeks govt nod to raise Rs 8,000 crore through bonds

Faced with liquidity crunch, the Food Corporation of India has sought government's approval to raise up to Rs 8,000 crore through long-term bonds for meeting working capital requirement.

FCI, the nodal agency for procurement and distribution of foodgrain, has sent a proposal to the food ministry seeking permission to raise funds via bonds as it is facing problems in running the operation considering non-payment of food subsidy worth Rs 40,000 crore from the government.

The corporation had approached the ministry a few months ago with a similar proposal, but it failed to get the nod for issuing long-term bonds.

"We have again forwarded a proposal to Food Ministry for raising up to Rs 8,000 crore via issuing bonds to meet our operational expenses and improve working capital," a senior FCI official said.

The subsidy dues with the government have risen to about Rs 40,000 crore, from Rs 32,000 crore at the start of this fiscal, he added.

In the Budget 2013-14, Finance Ministry allocated Rs 90,000 crore for the food subsidy, of which Rs 10,000 crore was earmarked for the implementation of the food security law, enacted in early September this year.

The bulk of the food subsidy is paid to FCI for running the public distribution system (PDS).

Operation costs of FCI have risen sharply in the last few years due to increase in the minimum support prices (MSP) of grains as well as high storage costs.

During the last fiscal, 2012-13, FCI had raised Rs 5,000 crore through issuing bonds.

In order to ensure smooth procurement operations, FCI has a cash credit limit of about Rs 55,000 crore with a consortium of 62 banks which is secured by mortgaging stocks. It also has the government approval to raise Rs 20,000 crore through short term loans.

However, the official said that at times cash-credit limit and short-term loans are not sufficient to meet the working capital requirement because of delays in food subsidy payment.

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