News Excerpt:

The government has increased the authorized capital of the Food Corporation of India (FCI) from Rs 10,000 crore to Rs 21,000 crore through a notification.

About the news:

• This move would infuse additional equity capital to fund the foodgrains stocks held by FCI, which is entirely owned by the government.
• The additional capital infusion will reduce the borrowings of FCI, save interest cost and reduce food subsidy in consequence.
• It will help FCI save approximately Rs 750 crore annually.
• To keep sufficient foodgrain stocks and also to fund delays in subsidy payments from the government, the FCI borrows through short-term loans and cash credit limits.
• While the food subsidy is essentially the difference between the economic costs of the National Food Security Act grains for the government and the issue (retail) prices to the beneficiary consumers, the loss-making operations are undertaken by FCI and other government agencies. 
• These operations are funded out of Budget, but sometimes, delays in release of budgetary funds necessitate FCI to borrow from market to continue the operations without any disruptions. The interest on these loans adds to the food subsidy expenditure. 
• Nearly 70% of the food subsidy budget is routed through the  FCI. As per the revised estimates for 2023-24, out of the total allocation of Rs 2.1 lakh crore under the food subsidy, Rs 1.4 lakh crore is routed through FCI.
• In 2019 also, the government had increased the authorized capital of FCI from Rs 3,500 crore to Rs 10,000 crore, signifying a greater trust in the operations of the corporation.

About the Food Corporation of India (FCI):

• The FCI is a statutory body formed by the enactment of the Food Corporation Act, 1964 by the Parliament.
• Nodal Ministry: Ministry of Consumer Affairs, Food and Public Distribution
• Objectives:

• • Effective price support operations for safeguarding the interests of the farmers.
  • Distribution of foodgrains throughout the country for the public distribution system.
  • Maintaining a satisfactory level of operational and buffer stocks of foodgrains to ensure national food security. 
• Since its inception, FCI has played a significant role in India’s success in transforming crisis management-oriented food security into a stable security system.
• FCI is responsible for the procurement of foodgrains from farmers, stocking, and distribution under the Public Distribution System(PDS).
• The corporation utilizes the food subsidy to provide grains to 800 million people while incurring most of its expenditure on account of the minimum support price (MSP) given to farmers for the procurement of wheat and rice, their storage, transportation, etc.