Cabinet Approves ₹10,700 Crore Equity Infusion for FCI

In a significant financial boost, the Union Cabinet approved an equity infusion of ₹10,700 crore for the Food Corporation of India (FCI) on Wednesday. This move is expected to reduce FCI’s dependency on high-interest debt for funding its large-scale food distribution efforts. It aligns with the government’s ongoing strategy to enhance food security and minimize subsidy burdens.

Equity Infusion to Lower Debt Reliance

The infusion of equity aims to mitigate FCI’s reliance on various high-cost borrowing methods, such as cash credit and short-term loans. By decreasing FCI’s interest obligations, this support is anticipated to cut down the government’s subsidy expenses. Earlier in 2023, the government approved a similar infusion of ₹21,000 crore, reflecting an ongoing commitment to financially stabilize FCI and reduce borrowing requirements. This financial support will bolster FCI’s capability to execute its food distribution and storage modernization initiatives.

Key Role of FCI in National Food Security

FCI is integral to India’s food security, procuring grains at federally set Minimum Support Prices (MSP) and distributing them to about 800 million beneficiaries under the National Food Security Act of 2013. Nearly 70% of national food subsidies are managed through FCI, making it essential for stabilizing food prices and ensuring consistent food supply. The agency also maintains strategic grain reserves, vital for addressing market and supply chain fluctuations.

Reducing Economic Costs and Impact on Fiscal Deficit

With this capital boost, the government aims to reduce FCI’s economic costs, which include procurement, storage, and distribution of grains. Previously, off-budget funding had been used to manage FCI’s expenses, but the latest equity infusions should eliminate this need, reducing fiscal deficit pressures. Lower fiscal deficits can positively affect India’s sovereign credit ratings, which in turn help reduce the government’s borrowing costs.

Here’s a concise table on the ₹10,700 crore equity infusion for the Food Corporation of India (FCI):