Wednesday, February 26, 2020


With over 711.18 LMT food grain stocks till Aug, FCI faces massive losses
Thursday, 12 September, 2019, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
Food Corporation of India (FCI) has been under fire for the past few years because of its mounting losses. With over 711.18 Lakh Metric Tonne (LMT) of food grains stocked till August 2019, the corporation is again faced with massive losses.

The stocks rose steadily over last few months as FCI continuously procured through last four months wherein stocks were recorded at  742LMT in July and around 741 LMT in June. In May, the FCI had stocks of 622LMT of food grains, rice and wheat.

In April this year, the stocks were recorded at 463LMT. The MSP for the year 2019-20 has been announced at Rs 1,815 and 1,835 for rice (common and grade A respectively) and Rs 1,840 for wheat per quintal. However, according to the FCI the economic cost for the food grains per quintal was estimated around Rs 2,505.67 and Rs 3,601.91 for wheat and rice per quintal respectively for the current fiscal.

According to the FCI’s food grain stocking norms, stocks are divided into two parts, operational stock and strategic stock, together called buffer stocks and are divided in four quarters, and maintained according to the requirements.  As on April 1, a total of 210 LMT should be maintained by the FCI, as on July 1, it should be 411.20 lakh metric tonne, as on October 1,  the buffer stocks should be 307.70 LMT while as on January 1, 214.10LMT reserves were needed.

Department of Food and Public Distribution informed Parliament that as on June 30, 2019, storage capacity available with FCI for Central Pool Stock was 407.31 Lakh MT (Owned – 153.35 LMT and Hired 253.96 LMT).  In addition, 471.24 Lakh MT (Covered – 365.50 LMT and Cover & Plinth (CAP) – 105.74 LMT) is utilised by State governments for keeping Central Pool Stock while,  as on July 1, 2019, a quantity of 742.52 Lakh MT Central Pool stock is stored in FCI godowns (both owned and hired).

In a reply to a question, MOS consumer affairs, food & public distribution, Danve  Raosaheb Dadarao told that Department of Food & Public Distribution fully bears the cost to run the foodgrain procurement, storage and distribution operations of FCI.

“The Department has provided Rs 1,40,098 crore as subsidy to Food Corporation of India for Financial Year 2018-19. This includes National Small Savings Fund (NSSF) loan of Rs 70,000 crore. The budget provision of food subsidy for FCI for FY 2019-20 is Rs 1,51,000.00 crore,” he informed.

He added that in addition to this fund, the working capital requirement of FCI is financed through a mix of debt and equity.

“The debt comprises National Small Savings Fund (NSSF) loans and Ways and Means Advance, both provided by Government of India, Cash Credit Limit (CCL) facilities from consortium of banks backed by Government of India guarantee and long term Government guaranteed bonds. In addition, FCI is also availing unsecured Short Term Loans (STL) from scheduled banks to tide over cash flow mismatch,” he told Parliament.

However, the FCI does sell some stocks through its open market sale scheme which most of the time does not fetch good amount as the pre determined price or reserve price is often less than the procurement cost or the economic cost  and it ends in making loss.

Last year, the reserve price for wheat under OMS for the 2nd, 3rd, 4th quarter for MP, Punjab, Haryana was announced at Rs 1,900, Rs 1,925, Rs 1,950 while the economic cost of wheat was Rs 2435.23 per quintal .
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