(FE)
Steep hikes in minimum support prices (MSP) and lower realisation from sales of grains by the Food Corporation of India (FCI) have pushed the Centre’s food subsidy bill over the last few years, inflating its unpaid bills to FCI to a staggering Rs 2 lakh crore by the end of FY19.
As this is a ticking bomb, BofA Merrill Lynch Global Research said in a recent note that the actual food subsidy bill must now grow slower than the nominal GDP for the Centre to generate some room for this huge back-pay to be released. “In theory, the government should refrain from large MSP increases for the next few years,” the firm said.
The cash-strapped government has arranged loans to the tune of Rs 1.91 lakh crore for FCI from the National Small Savings Fund (NSSF) during the past three years to ensure that procurement and distribution operations under the food security programme are unaffected. Repayment of these loans, for sure, is the Centre’s obligation as FCI has no means of cash generation, independent of the support from the Budget.
