FCI explores off-budget financing

AFTER A FOUR-YEAR gap, the Food Corporation of India (FCI) is exploring the option of raising about ₹25,000 crore through off-budget resources to bridge a widening gap between budgeted allocations and its sharply higher projected food subsidy expenditure in FY26.

- SANDIP DAS

The proposed fundraise, through government-guaranteed bonds, reflects mounting pressure on FCI's finances as subsidy costs overshoot initial estimates.

Sources told FE that the practice of funding food subsidy shortfalls through loans from the National Small Savings Fund (NSSF) and bond issuances was formally discontinued in 2021. FCI last tapped the bond market in August 2021,raising ₹8,000 crore, just ahead of the new funding framework coming into force.

In her 2021-22 Budget speech, Finance Minister Nirmala Sitharaman had announced an end to extra-budgetary borrowings for food subsidy, after such liabilities swelled to nearly₹6.7 lakh crore by end-FY21. In FY22, the Centre brought about ₹5 lakh crore—nearly 75%—of these liabilities onto its balance sheet, largely by taking over₹ 4.27 lakh crore of NSSF loans raised by FCI to clear food subsidy arrears.

Following this clean-up, FCI's cash position remained relatively comfortable, aided by timely subsidy releases from the government. That situation, however, has changed in FY26, with expenditure pressures rising well beyond initial projections.