An extra-budgetary provision of Rs 1.45 lakh crore made to state-run FCI in the Budget for 2023-24 fiscal is an "indicative outlay" of short term working capital, otherwise the food subsidy outlay made for the agency is "adequate" to cover all the anticipated procurement costs for PDS, according to the food ministry.

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Food Corporation of India (FCI) is the Centre's nodal agency for procurement and distribution of foodgrains through the Public Distribution System (PDS). The difference between the economic cost and central issue price of foodgrains is paid as a food subsidy to the agency.

A big part of the Union government spending comes from outside the budget, which is referred to as internal and extra-budgetary resources (IEBR). IEBR constitutes the resources raised by public sector units through profits, loans and equity. An IEBR provision of Rs 1.45 lakh crore has been made for FCI in the Budget for the 2023-24 financial year.

According to the ministry, "The purpose of an outlay of Rs 1.45 lakh crore shown as Internal and Extra Budgetary Resources (IEBR) for FCI in the Budget Estimate (BE) FY'2023-24 represents an indicative estimate of short-term working capital requirement of FCI to defray costs of procurement/managing PDS operations."

The ministry explained that food subsidy is released to the FCI on a reimbursement basis from the Budgeted outlay after procurement and distribution of essential commodities through the PDS. Pending its receipt, FCI manages its working capital requirements or the costs arising from procurement operations, establishment, freight, storage inventory carrying charges, etc., by availing cash credit.

This cash credit is arranged through different modes like from consortiums of banks, short-term loans (up to 90 days), ways and means advance, etc, it said and added that the costs from working capital requirements are included in the food subsidy released to FCI from the Union Budget.

Further, the ministry said as part of the government's commitment to budgetary transparency and proactive disclosure, the budget documents for FY '2023-24 discloses indicative working capital requirements for FCI for the next fiscal "upfront".

However, the actual utilization against the indicative estimate is expected to be need-based and in a phased manner. This has been a continuing arrangement made available to FCI, it said.

For instance, in the current 2022-23 fiscal, the indicative IEBR outlay was Rs 89,425 crore in the Budget Estimates, which has been scaled down to Rs 56,935 crore in the Revised Estimates, on account of lower carrying cost of reduced inventory, it added.

According to the ministry, higher IEBR estimate for FY24 reflects FCI's anticipation of higher levels of procurement including incidental expenses due to increased inventory of essential commodities in the year.

"The government further reiterates that the provision for food subsidy in the Budget for FY 2023-24 is adequate to cover all anticipated costs pertaining to projected PDS requirement of essential commodities for distribution amongst the beneficiaries," it added.