State-run FCI would have saved Rs 35,701.81 crore interest burden in 2011-16 had the government released food subsidy on time, the CAG said on Friday, suggesting that full allocation be made to the agency.
The central auditor also suggested the Food Corporation of India (FCI) to approach a consortium through the food ministry for allowing it to utilise short-term loans before exhausting the cash-credit limit.
In the latest report tabled in Parliament, the Comptroller and Auditor General (CAG) said the FCI should get permission again to obtain guarantee for issue of bonds so as to gain access to cheaper source of funds.
The CAG examined FCI's debt management during 2011-16 as well as labour issues and the PEG scheme progress in Punjab.
"On an average, only 67 percent of subsidy claimed was released by the Government of India over the last five years because of which FCI had to borrow from other costlier means of finance resulting in heavy interest burden of Rs 35,701.81 crore during 2011-16," the CAG said in the report.
FCI had claimed a subsidy of Rs 4,45,809.59 crore during 2011-16. Out of which, it received only Rs 3,00,675.88 crore from the ministry.
But the agency's foodgrain procurement, distribution and other administrative costs had amounted to Rs 6,33,788 crore in the review period.
Had the government paid the full amount of subsidy within the same financial year, there would not have been any need to take money from market sources and thus additional interest could have been saved. This is a completely avoidable payment of interest.Ashutosh Sharma, Principal Director and Auditor, CAG
The situation was better last year, said CAG Principal Director and Auditor Ashutosh Sharma. Reimbursement during last year was slightly better, he said, adding that the finance ministry releases less funds towards subsidy because they have competing priorities.
The government's food subsidy would have been less by about Rs 35,700 crore over the past five years had it given money in time to FCI rather than paying interest on market loans, Sharma added.
In the report, the CAG said the FCI had to resort to costlier source of financing due to restrictions imposed by consortium of banks for utilising short-term loans and lack of permission by the government to raise bonds. FCI was paying interest between 10.01 percent and 12 percent on cash credit, resulting in extra burden on the exchequer, it said.