Govt examining proposal to raise Rs 40,000 crore via bonds from LIC

Tuesday, 4 August,New Delhi: Faced with severe shortage of funds to meet the food subsidy bill, the government on Tuesday said it is examining a proposal to raise Rs 40,000 crore via long-term bonds from LIC to liquidate the subsidy arrears.

Subsidy arrears of state-run Food Corporation of India (FCI), the nodal agency for procurement and distribution of grains, stood at Rs 50,730 crore in 2014-15 fiscal, and is estimated to be Rs 22,348 crore this year.

“Owing to less allocation of funds in the Budget compared to the projected requirement, this Department is facing shortage of funds in disbursing food subsidy to FCI as well as to states,” Food Minister Ram Vilas Paswan said in a written reply to the Lok Sabha.

He said that the government has taken several measures to make available sufficient funds to FCI and at present is considering a proposal to raise Rs 40,000 crore through issue of bonds from Life Insurance Corporation of India (LIC).

“A proposal for the issue of government guaranteed bonds of loan of Rs 40,000 crore to LIC against arrear subsidy is under examination,” he said.

To ensure smooth functioning of FCI, the government has sanctioned a cash limit of Rs 54,495 crore and raised short- term loan of up to Rs 30,000 crore from Rs 20,000 crore and given ‘Ways and Means Advance’ of Rs 10,000 crore, he said.

Paswan said that his ministry has regularly been pursuing the matter regarding allocation of sufficient funds for food subsidy.

“Though government has increased the budgetary allocation for food subsidy in recent years but owing to budgetary constraints and other pressing financial commitments, allocation made is still insufficient to meet the actual requirement of funds, especially in respect of FCI,” he said.

As per the data placed before Parliament, the government had allocated Rs 97,000 crore against the projected requirement of Rs 1,47,730 crore for the 2014-15 fiscal. The shortfall was Rs 50,730 crore for last year.

For the current year, Rs 97,000 crore has been allocated against the requirement of Rs 1,19,348 crore. The arrears are estimated to be Rs 22,248 crore for 2015-15 fiscal.