Millennium Post

FCI invites bids for `20,000 crore short-term loans

Amid rising food subsidy arrears, the Food Corporation of India (FCI) for the second time this fiscal has floated a tender inviting bids for short-term loan of Rs 20,000 crore for smooth procurement and distribution of food grains.

In April this year, FCI had floated a tender for the same amount and raised it from around 20 banks at interest rates in the range of 10.19-10.25 per cent.

In the recently floated tender on 15 July, the FCI said, ‘To meet out its short-term fund requirement for procurement and distribution of food grains, the corporation is considering raising short-term loans from the scheduled banks only for 90 days tenure.’

In 2013-14, the government had provided Rs 75,500.02 crore as subsidy to the FCI, while subsidy incurred during the year stood at Rs 1,03,791.85 crore. The total subsidy arrears, including carried over from previous years, amounted to about Rs 50,000 crore.

The arrears are estimated to touch Rs 68,000 crore by the end of the current fiscal as against the demand of Rs 1,10,000 crore. The government has allocated Rs 92,000 crore as food subsidy to the FCI for 2014-15. The corporation has been left with no other option but to raise short-term funds for its procurement and distribution operations, according to sources.

Besides arrears, the delay in subsidy payments is also forcing the nodal agency for raising funds.
In the tender, which closes on 24 July, the minimum quote has been fixed at Rs 250 crore and tranche size at Rs 20,000 crore. The Corporation takes short-term loans from various scheduled commercial banks normally at base rate.

‘Rate of interest quoted is to be linked with the base rate of the bank quoting the plus/minus to the base rate to arrive at the effective rate at which the offer for short-term loan can be extended to FCI,’ says the tender.

Banks can bid for different tenures but the final call will be taken by the corporation. Meanwhile, in the tender FCI has clarified, ‘Neither the government of India guarantees nor any other security is available for this short-term loan and this would be an unsecured one.’ 
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