SHIVAM DUA

A PROJECT REPORT
ON
Study of the Funds Analysis of the Food
Corporation of India (FCI)

Done at:
Food Corporation of India, HQ
16-20, Barakhamba Lane, New Delhi- 110001

Submitted By:
Name: - Shivam Dua
Enrolment no: - 00421001909
Course: - BBA(CAM)

IDEAL INSTITUTE OF MANAGEMENT AND

TECHNOLOGY
(Affiliated to G.G.S. Indraprastha University, Delhi)

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ACKNOWLEDGEMENT
At the outset, I would kike to thank Food Carporation of India, HQ for giving me
an opourtunity to successfully complete my summer internship in their esteeme
organization. It has been a big learning experience for me and I would like to
express my gratitude towards all the people who have guided and supported m
in completing this project.

I would like to express my heartfelt gratitude to Mr. Jitendra Mendiratta , AGM

Bills(Drawing & Distributing Officer) for his help, guidance and constructive
criticism during the course of my training. I would also like to thank Mr. Sudhir
Mahajan, manager(Accounts,CFS) for his constant support in completing this
project.

Finally I would like to thank all officers of finance department who provided me
with valuable information regarding various processes that take place in the
overall functioning of finance in FCI

I would like to thank Mr.Mayank Gupta-Faculty guide, Ideal Institute Of

Management and Technology (IIMT) for constant supervision, guidance and
support.

CONTENTS

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1. Company Profile:-

2. Objective of the Project:-

3. Introduction to Financial analysis:-

4. Significance of the Working Capital:-

5. Analysis of Working Capital:-

6. Conclusion and Suggestions:-

References

FOOD CORPORATION OF INDIA

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A BREIF HISTORY

The Food Corporation of India was set up under the food Corporation Act 1964 and on 14 th
January,2009, FCI completed 45 years of its existence. FCI was set up to secure strategic
position in food grains trade and implement the National Policy for Price Support operations,
procurement, storage, inter-state movement and distribution operations, in short to operate
the Central Pool. Today FCI is the country leader in food grains management and is fully focused
on helping
Farmers feed the country, better and more efficiently, today and tomorrow.

Food constitutes the main requirement of every human being. In a sub-continent like India
where millions of mouths depend to targeted Public Distribution System(TPDS) and other
welfare schemes of
Govt. of India, FCI, plays a leading role in making food grains available to the extent of 30 lakh
tones during a month, to respective State Govts. For its distribution among beneficiaries. To
procure, store, preserve and move such a huge quantity of stocks spreading over vast areas with
its intricate network is, indeed, a nerve and back-jerking tasks.

To nurture the Green Revolution , the Government of india introduced the scheme of minimum
assured price of foodgrains which are announced well before the commencemen t of the crop
seasons, after taking into ac ount the cost of production /inter-crop price parity, market prices
and other relevant factors.

 The food Corporation of India alone with other Government agencies provide effective
price. Assured for wheat, paddy and coarsegrains.
 FCI and the State Govt. agencies in consultation with the concerned State
Govts. Establish large number of purchase centres throughout the state to facilitate
purchase of foodgrains
 Centres are selected in such a manner that the farmers are not required to cover more
than 10 kms. To bring their produce to the nearest purchase centres of major procuring
states. Price support purchases are organized in more than 12,000 centers for wheat
and also more than 12,000 centers for paddy every year in the immediate post-garvest
season.
 Such extensive and effective price support operations have resulted in sustaining the
income of farmers over a period and in providing the required impetus for higher
investment in agriculture for improved productivity.
 To name a few states about Rs.41,000 m illions fo paddy and 43000 millions for wheat in
Punjab
 And Rs.45,000 millions for levy rice in Andhra Pradesh is paid to the farmers/millers
during wheat/rice procurement season
 India today produces over 200 million tones of foodgrains as against a mere 50 million
tons

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 In 1950.
 In the last two decades, foodgrain procurement by Government agencies have
witnessed a quantum jump from 4 million tones to over 25 million tones per annum.
 Food grain are procured acc ording to the Government – prescribed quality standards.
 Each year, the Food Corporation purchases roughly 15-20% of India’s wheat production
and 12-15%of its rice production.
 This helps to meet the commitments of the Public Distribution System and for building
pipeline and buffer stock.

RESEARCH METHODOLOGY

 Research Methodology is a systematically solve the research

problem. It has many dimensions and research methods constitute
a part of the research methodology.
 Thus when we talk about research methodology, we do not only
talk of the research methods but also consider the logic behind the
methods. We use in context of our research study, so that research
results are capable of being evaluated either by researcher himself
or by others.
 To effectively carry out in research, I would use the following
research process, which consists of series of actions or steps.

Research comprises of the following steps:-

1. Formulating the research Problem.

2. Research design & Sample Design.

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3. Analysis of data gathered

4. Data analysis comparison

5. Graphics and interpret

1 FORMULATING THE RESEARCH PROBLEM

This is the first step under which the problem is stated in general way
and then ambiguities i.e. understanding and rephrasing the problem
thoroughly and rephrasing the same into a meaningful terms from an
analysis point of view.

The research problem under the present project was to study data of
various funds. For this research process was to be formulated and the
execution of which would result in the desired data.

2. PREPARING THE RESEARCH DESIGN

The function of research design is to provide for the collection of

relevant evidences with minimal expenditure of efforts, time and
money.

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Research Design

 Type of research

 Sample design

TYPE OF RESEARCH

 The type of research under present is an analytical research. In

analytical research; we use tact's or information already available,
and analyze these to make a critical evaluation of the material.
Hence the same would be done.

 In this project I had collected facts, data, and information.

SAMPLE DESIGN

A sample design is a definite plan determined before any data is

actually collected for obtaining a sample. Researcher must select a
sample design, which should be reliable and appropriate for his report.

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3. OBSERVATIONAL DESIGN (COLLECTION OF

DATA)

Observational design relates to the condition under which the

observations are to be made. Observational design in respect to
research. There are several ways of collecting the appropriate data,
which differ considerably in context of money, time cost and other
resources at the disposal of the researcher.

Data can be obtained from two important

sources:

 Primary data

 Secondary Data

Primary data

Primary data are the data that are collected afresh and for the first
time. Thus happens to be in character. Primary data are collected by
the following ways:-

a) Observation

b) Interview

c) Schedule

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d) Questionnaire

Secondary Data

Secondary data are the data that are already collected and are
only analyzed by different sources these sources are as follows:-

 Corporate magazine

 Manuals of various companies

 Books, journals, newspaper

 Employment exchange

The secondary data would be collected from financial

statement, journal of national repute, books of national and
international author as well as the annual report of the company. In
addition to this internet access will make the study more effective and
meaningful.

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Vision 2020

 To aggressively promote Decentralized Procurement by

State Governments with special emphasis in non-
traditional areas and commodities.
 To initiate procurement of non-MSP governed
commodities on commercial principles.
 To ensure adequate buffer for meeting requirements
under TPDS & Other Welfare Schemes.
 To dispose off surplus and un-storage worthy godowns
and introduce concepts of mechanized handling in the
conventional godowns.
 To undertake R&D for conversion of some of the
existing capacity to bulk and cost effective utilization
of existing bulk capacity.
 To optimize monthly movement programme with existing
state of art of computerization within the country at
various locations as per corporate policies and
priorities.
 Modernization of Quality Control equipments and
systems for food preservation in order to increase the
shelf life of food grain.
 To venture in the fields of Forward Trading and
Exports of both surplus stocks of food grains in Central
Pool and no-traditional commodities.
 To introduce state of art of financial management in

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order to reduce the dependency on the present banking

system in the country.
 To initiate systems for settlement of storage loss and
transit loss through insurance coverage and revised
inventory mechanism.
 To develop efficiency in human resource management

both in staff/officers and workers with changed

circumstances in the work approach of P.S.U. s.
 To achieve state of art in computerized communication
between different offices/ depots through  out the
country.

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OBJECTIVES

 To provide farmers remunerative

prices
 To make food grains available at
reasonable prices,   particularly to
vulnerable section of the society
 To maintain buffer stocks as
measure of Food Security
 To intervene in market for price
stabilization

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QUALITY POLICY

FCI, as the country?s nodal organization for

implementing the National Food Policy, is
committed to provide credible, customer focused
services, for efficient and effective food security
management in the country.  Our focus shall be:

  Professional excellence in Management of

food grain and other commodities

  Service quality and stake holder orientation

  Transparency and accountability in

transactions

  Optimum utilization of resources

  Continual improvement of systems,

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processes and resources

QUALITY OBJECTIVES

  Fulfillment of all the targets set as per Govt.

of India Food Policy from time to time. 

  Monitoring of Quality in all major

transactions, processes leading to improved
customer satisfaction level

  Accountability for efficiency,

responsiveness, performance and
minimization of all losses & Wastes

  Need based up gradation of infrastructure

and work environment

  Need based enhancement of available

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knowledge & skills.

  Transparency in decision making, effective

communication leading to harmonious
employee relations

  Establishing, maintaining and improving ISO

9001:2000 based Quality Management
Systems covering all areas of activity.

  

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Strength of FCI
Facilitator for food security

 Provider of price & market assurance to the farmer

 Ensuring steady food grain supplies to 5 Lakhs Fair Price

Shops for PDS to cover 141 million APL / 67 million card
holders.

 Ensuring food for All other Welfare Schemes.

Management Capability and Experience

 Large pool of talent managing world's largest food grain

operation on behalf of Govt. of India

Enormity of Scale

 Countrywide network of offices & strategically located

Food Storage Depots.

 Operates in mandis/purchase centres located within 10

kms. proximity of farmers.

 Undertakes purchases of 30 to 40 million tonnes annually

making it the largest buyer in the world.

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Effective market intervention to stabilize prices 

State of the art experience on food grain

preservation / Warehousing / Transportation
Management

 Maintains the health of millions of tonnes of food grain in

storage. Quality acknowledge by International buyers.

Excellent Storage Management.

 Timely movement of food grains from procuring States to
consuming States.

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Opportunities

 After nearly four decades of varied

experience in food management, FCI can
now play a wider role in being a food
advisor to the Central/State Govts.

 The Corporation can also play a more

proactive role in the sphere of
commercial ventures.

 To diversify into non traditional

commodities / activities.

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OPERATIONAL NETWORK
FCI operates through a country-wide network with its
Corporate Office in New Delhi, 5 Zonal Offices, 23
Regional Offices practically in all the State capitals,  165
District Offices(as on 01.10.2008) and 1470 depots (as on
01.01.2007)

Most of the Revenue Districts in the country are covered by

FCI.

 It has a manpower  of 33,473 officers and staff /employees

as on 31.03.2010 and about 53,646 regular  food handling
workers  besides approximately one lakh food handling
contract  labourers being engaged by the Handling &
Transport Contractors,  as on 31.03.2010

The general superintendence, direction and management of

the affairs and business of the Corporation shall vest in a
board of directors which exercise all such powers as may be
exercised or done by the Corporation under this Act.

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The board of directors, in discharging its functions, act on

business principles having regard to the interest of the
producer and consumer and shall guided by such
instructions on questions of policy as may be given to it by
the Central Government.

Distribution of Foodgrains 

The national objective of growth with

social justice and progressive
improvements in the living standards of
the population make it imperative to
ensure that foodgrain is made available Distribution through Fair Price shop
at reasonable prices.

 Public Distribution of foodgrains

has always been an integral part
of India ?s overall food policy. It
has been evolved to reach the
urban as well as the rural FPS in remote hill areas in HP
population in order to protect the
consumers from the fluctuating  
and escalating price syndrome.
 Continuous availability of
foodgrain is ensured through
about 5 lakhs fair price shops
spread throughout the country.
 A steady availability of
foodgrains at fixed prices is
assured which is lower than
actual costs due to Govt. policy
of providing subsidy that absorbs
a part of the economic cost.
 The Govt. of India introduced a
scheme called Targetted Public
Distribution Scheme (TPDS)
effective from June, 1997. The

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stocks are issued under this

scheme in the following two
categories:-

a) Below Poverty Line (BPL):

Determination of the families under this
category in various states is based on
the recommendation of the Planning
Commission. A fixed quantity of 35 Kg.
foodgrains per family per month is
issued under this category. The stocks
are issued at highly subsidized Price of
Rs.4.15 per Kg. of wheat and Rs. 5.65
per Kg. of rice.
Antyodaya Anna Yojna - During the
year 2000-2001 Govt. of India decided
to release foodgrains under Antyodaya
Anna Yojna. Under this scheme the
poorest strata of population out of
earlier identified BPL population is
covered. Foodgrains are being
provided to 2.5 crores poorest of the
poor families out of the BPL families at
highly subsidized rates of Rs.2/- per
kg. of wheat and Rs.3/- per kg. of rice
by FCI. This is the biggest food
security scheme in the world.

b) Above Poverty Line ( APL) ?

Families which are not covered under
BPL are placed under this category.
The stocks are issued at Central Issue
Price of Rs. 6.10 per Kg.  of wheat and
Rs. 8.30 per Kg. of rice.
Allotment/Offtake of Wheat/Rice

The Central Issue Price (CIP):-

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                                         (Rate: Rs./Qtl.)

Commodit Effective BPL APL AAY

y From Families Families Familie
s
Wheat 01- 07- 415 610 200
2002
Rice 01- 07- 565 795* 300
Common 2002
Rice 01- 07- 565 830 300
Grade-A 2002

(*): Applicable to J&K, Himachal Pradesh, Sikkim, Uttaranchal and

NE States.

There are number of other welfare schemes of the Govt. of

India :

(a) Mid-Day-Meal-Scheme (MDM)- The Govt. of India have

introduced MDM ? National Programme of    Nutrition Support to
Primary Education in Primary Schools w.e.f. 15.8.1995. Under the
scheme every students upto 5th class of Govt. schools is entitled for 3
Kgs. of wheat/rice per month @ 100 Grams.

Since October 2007 allocation of foodgrains have also been made for
the students from 6th to 8th class in the educationally backward blocks
and every student is entitled for 150 Grams of foodgrains per child
per school day.

The Scheme is partly run by Govt./Aided Schools/Local Bodies to

serve free cooked / processed hot meal. FCI is supplying foodgrains
free of cost to the State/UTs. This scheme is partly financed by
Ministry of HRD.

(b) Wheat Based Nutrition Programme (WBNP) - A scheme run by

Department of Women and Child Development, Ministry of Women &
Child Development for providing nutritious food to children below 6
years of age and expectant/lactating women. Foodgrains supplied by
FCI at BPL rates.

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(c)&(d) SC/ST/OBC Hostels & Welfare Institutions & Hostels- 

The Ministry of CAF&PD and the Ministry of Social justice &
Empowerment coordinate to monitor of the Scheme for providing
foodgrains to SC/ST/OBC Hostels. Hostels having students belonging
to SC/ST/OBC categories are eligible to draw 15 Kgs. Foodgrains per
resident per month.

The Government of India decided that w.e.f. 2.11.2000 foodgrains

(wheat/rice) will also be allotted to the state Governments at the rate
of 5 Kg per head per month for indigent people living in Welfare
Institutions, such as. Beggar Homes, Home for Nari Niketan etc.
sponsored by the State Govts. and the concerned administration.
Foodgrains are supplied by FCI at BPL rates. It may be clarified that
from the year 2002-03, the MOCAF&PD has been making the
requirement of the State/UT  under the head "Welfare Institutions &
Hostels" to meet the requirement of the State/UT for providing
foodgrains to different type of welfare institutions. Since April 2005,
the Ministry of CAF &PD has enhanced quota of allotment under this
scheme to 5% of the monthly allotment made under BPL & AAY.
Presently, the foodgrains is being allotted by MoCAF&Pd on the basis
of average offtake during last three years under the scheme.

(e) Annapurna Scheme- Indigent Senior Citizens of 65 years of age

or above eligible for National Old Age Pension under NOAPS, but not
getting pension can get 10 Kgs of foodgrains per month. FCI is
issuing foodgrains under this scheme to State/UT Govts. at BPL
rates.

Under This scheme of Ministry of Social Justice & Empowerment,

Indigent people living in Welfare institutions like Beggar Homes,
Orphanages, Nari Niketans etc. are given 15 kgs of foodgrains per
person per month. Foodgrains are supplied by FCI at BPL rates.
Presently, the scheme is being run by the Ministry of CAF&PD.

(f) Sampoorna Gramin Rozgar Yojana- A scheme financially

supported by Ministry of Rural Development in which foodgrains are
supplied to the States/ UTs by FCI free of cost.

(g) Special Component of Sampoorna Gramin Rozgar Yojna -

Under the Special component of the SGRY financed by Ministry of

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Rural Development for augmenting food security through additional

wage employment during natural calamity. FCI release foodgrains
free of cost to the State/UTs.

Since 1st April 2008 no allotment of foodgrains has been made

by the Govt. of India under SGRY.

(h) Foodgrains to Adolescent Girls Pregnant and Lactating Mothers

( AGPLM). GOI introduced this Scheme w.e.f January , 2003 Under
this scheme foodgrains is being supplied by FCI at BPL prices to the
State/UT Govt. for Adolescent Girls, Pregnant and Lactating Mothers
( AGPLM). The identified under nourished woman/girl is provide 6 Kg.
of foodgrains (wheat/rice)/month. The scheme is partly supported by
Planning Commission. The scheme is being run by MoCAF&PD with
the new name Nutritional Programme for Adolescent Girls (NPAG).

(i) World Food Programme (WFP) - FCI is sparing stocks to WFP

projects from the Central Pool stocks as and when required by them.
FCI is working as 'FOOD BANK' for World Food Programme(WFP)
projects in India . When India was deficit of foodgrains, WFP used to
get stocks to meet the deficiency through import.

(J) Emergency Feeding Programme - Under this scheme, Ministry

of CAF & PD releases allocation of rice at BPL rates, for KBK
Districts (Bolangir, Kalahandi, Koraput, Malakangiri, Nabarangpur,
Naupada, Rayagada & Sonepur) of Orissa State on monthly basis.
Under this scheme, rice @ 7.5 kg/beneficiary/month is issued for 2
lakh beneficiaries. This programme is being run by the Ministry of
CAF&PD.

(k) Grain Bank -  This scheme provides Grants for establishment of

village Grain Bank to prevent deaths of Schedule Tribes specially
children in remote and backward tribal villages facing or likely to face
starvation and also to improve nutritional standards. The scheme
provides funds for building storage facility, procurement of weights &
measures and for the purchase of initial stock of one quintal of
foodgrains of local variety for each family. The allocation of
foodgrains was made by the GOI, Ministry of Tribal Affairs during the
year 2002-2003. Under this scheme foodgrains are allotted to States

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at BPL rate. Since 2006-07 the scheme is being run by Ministry of

CAF&PD. The cost of foodgrains as food component is being paid to
FCI in advance at economic cost. State Govts. are lifting foodgrains
free of cost from FCI.

(l) National Food for Work Programme - this programme has been
launched by the Prime Minister during November 2004 for providing
foodgrains in identified 150 most backward districts of the country.
The beneficiaries of this programme are labourers engaged by the
State Govt. in development work. Foodgrains is given as part of
wages under the scheme to the rural poor at the rate of 5 kg. per
manday. More than 5 kg. foodgrains can be given to the labourers
under this programme in exceptional cases subject to a minimum of
25% of wages to be paid in cash. Under this programme foodgrains
ae issued to states/UTs free of cost. This scheme is mentored by 
Ministry of Rural Development.

Since 2006-07 the scheme has withheld    

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Organizational structure

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REQUIREMENT FOR TAKING SHORT TERM LOAN

Keeping in view the periodic increase rate of interest by the consortium of the

Banks as well as to raise additional resouirces to meet the requirement of funds at the time to

Peak procurement, the corporation is taking steps for availing alternative sources of finance
through

Short Term Loan to achieve the twin objective of reduction in interest cost and improving the
liquidity.

As per stated above there are few ways to get the funds-like STL, BONDS, ect. Through
this

Project, we come to know, how to raise funds through short term loans. What is the procedure
and

The criteria and from whom they take the permission.

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FINANCIAL FEATURES
Average Bank Borrowing during  2007-08
Rs. 27327 Crores
(Consortium of 65 Banks as on 31.3.08)
Commercial Borrowing (Bonds) Rs. 8605 Crores
Rate of Interest on Bank Borrowing w.e.f.
10.15 % p.a. (Monthly Compounding)    
01.03.2008
Rate of Interest on Bonds 7.31%p.a.(Annually Payable)

Equity Released for Plan Schemes and Working Capital (as on

31.03.08)

Rs. Cr.
Working Construction of IISFM Other
Year Total
Capital Godowns Project Schemes
Upto 2002-03 1484.00 855.11 Nil 13.89 2353.00
2003-04 Nil 23.96 15.50 Nil 39.46
2004-05 Nil 5.87 39.14 Nil 45.01
2005-06 Nil 20.78 15.00 Nil 35.78
2006-07 Nil 7.50 Nil Nil 7.50
2007-08 . . . . .
First Quarter Nil Nil Nil Nil Nil
Second Quarter Nil Nil Nil Nil Nil
Third Quarter Nil 3.18 14.49 Nil 17.67

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Fourth Quarter Nil 0.82 10.51 Nil 11.33

Total Nil 4.00 25.00 Nil 29.00
Total paid-up
1484.00 917.22 64.64 13.89 2509.75
Capital
  . . . . .
Authorised Capital . . . . 3500.00

  Economic Cost of Foodgrains of FCI

Crop-Year Wise Economic Cost

(Provisional)
                                                                            (Rs./qtl.)

Rice (Grade Rice

Year Wheat
A) (Common)
Rabi 2008 1515 - -
Kharif 2007 - 1716 1664

Accounting Year-Wise opening Stock adjusted weighted Economic

Cost

                                                                          (Rs./qtl.)

Year Status Wheat Rice 

2001-02 Audited 852.94 1097.96
2002-03 Audited 884.00 1165.03
2003-04 Audited 918.69 1236.09
2004-05 Audited 1019.01 1303.59
2005-06 Un-audited 1041.85 1339.69
2006-07(Prov) Prov. Estimates 1214.39 1411.60
2007-08(RE) Rev. Estimates 1348.69 1571.36
2008-09(BE) Budget Estimates 1458.83 1698.90

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Food Subsidy Released to FCI and Incurred by FCI (Rs. Cr.)

Food subsidy released to FCI Food Subsidy Incurred by FCI

Against Subsidy
For the Status of
Year Total Earlier Incurred
Year Accounts
years during the year
2001-02 16274.00 . 16274.00 18005.00 Audited
2002-03 22673.72 . 22673.72 25322.00 Audited
2003-04 23474.04 4545.86 18928.18 21587.00 Audited
2004-05 23280.00 4090.39 19189.61 20773.00 Audited
2005-06  19871.00 473.32 19397.68 21344.00 Un-Audited
2006-07 20786.21 1411.08 19375.13 24858.00 Prov.Estimates
2007-08 27759.68 5218.75 22540.93 31817.00 Rev.Estimates
2008-09
(Upto 5400.04 . 5400.04 . .
30/04/08)

  

                                                                                                               
         

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CASH FLOW (RABI)

1. INTRODUCTION

The Food Corporation of India has been set up under

an Act of Parliament primarily to:
(a) Provide price support to farmers to ensure
remunerative prices for their produce,

(b) Make available foodgrains at reasonable price

to consumers, particularly the vulnerable
sections of the society and

(c) Maintain buffer stocks as a measure of food

security not only to impart inter-seasonal
stability but also to meet the emergent
situations arising out of crops failure due to
drought, floods, etc.

2. WORKING CAPITAL.

To achieve the above objectives, the Corporation

undertakes procurement, storage, movement and
distribution of Central Pool stocks on a massive scale.
The working capital required for these gigantic
operations is provided by a consortium of banks
constituted by RBI under the leadership of SBI. The
quantum of working capital requirement for the ensuing
Rabi foodgrains operations has been projected keeping
in view the policies of the Govt. announced from time
to time. The gross out flow of funds for this purpose is
estimated at Rs.46400.15 crores against inflows of
Rs.54509.76 crores during April, 2010 to September,
2010. The details are given in the following
paragraphs.

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The Govt. of India has issued a single default guarantee

of Rs.34495 crores (enhanced from Rs.33100 crores) to
SBI w.e.f 07.05.2007 and valid up to 31.03.2008, the
validity of the guarantee was subsequently extended
upto 31.03.2012 vide Govt. of India’s letter No. 5-
4/2007/SC-II dated 23.02.2010 covering the entire
food credit of the Corporation. The State Bank of India
authorizes the monthly drawing power of the
Corporation equivalent to value of stock. For borrowing
beyond the value of stock SBI levies penal interest
@0.5% on the amount of excess borrowing.
3. CURRENT CASH CREDIT UTILISATION:

The monthly Credit limit/ drawing power used to be

authorized to the Food Corporation of India by the
Reserve Bank of India upto April, 2005. Thereafter RBI
stopped authorizing the credit limit, subsequently the
Reserve Bank of India vide letter dated 2.09.05 has
informed that henceforth State bank of India will take
care of the credit requirements of the Corporation.
Thereafter the State Bank of India started authorizing
monthly Credit limit/ drawing power of the Corporation
based on the value of stock. The drawing power was
fixed by SBI at Rs.17966.91 crores for the month of
February, 2010. The Cash Credit Utilization at the end
of March, 2010 is estimated at Rs.24616.61 crores.

4. PROCUREMENT/ TAKEOVER OF WHEAT

4.1 The table below shows market arrivals and
procurement of wheat for Central Pool including under
de-centralized system during the last five years.

Qty. Lakh Tonnes

YEAR MARKET PROCUREM

32
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ARRIVA ENT FOR

LS CENTRAL
POOL
QTY. QTY.
Rabi 2004- 181 168
05
Rabi 2005- 158 148
06
Rabi 2006- 137 92
07
Rabi 2007- 154 111
08
Rabi 2008- 244 227
09
Rabi 2009- 269 254
10

6. REVENUE EXPENSES:
Revenue expenses for the six month period have been
assumed at Rs5304 crores based on the FCI's budget
estimate for 2010-2011.

7. INTEREST ON BANK BORROWINGS:

The interest provision for food credit has been
considered at current rate of 10.25% at monthly rest.
9. FOOD SUBSIDY:
The food subsidy to the extent of Rs26000.00 crores is
estimated as receivable during the first six months'
period of the financial year 2010-11.An advance of
Rs.10,000/- crores ,as per comments of Ministry of
Finance , at an average interest rate for 364 days T
Bills could be provided from 2010-11 and adjustment
during the financial year itself against the provisions
made in the Budget 2010-11 for Food subsidy.

33
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10. STOCK:
10.1The estimated value of stocks at acquisition cost
as on 1st April 2010 vis-a-vis actual as on 1st
April'2009 is as under :-
Qty. In Lakh
Tonnes
Value: Rs.Crores
As on As on 1.4.2010
1.4.2009
Qty. Value Qty. Value
Wheat 66.27 7714.76 75.31 9347.78
Rice 134.1 20099.3 154.4 25715.37
2 6 3
Total 200. 27814. 229.7 35063.15
39 12 4

13. GROSS OUTFLOW:

The estimated fund requirement for foodgrains
operations from 01.04.2009 to 30.09.2009 is as
follows:-
Total For Quarter ending
4/201 (Rs. Crores)
0 April-10 July 10 to
to to June- Sept.10
9/201 10
0
I) For purchase of 19994. 14927.57 5067.13
Wheat including 70
takeover from State
Agencies.
II) For procurement 10948. 6953.08 3995.73
of Levy Rice including 81
Paddy and CMR
takeover from State
Agencies.
III) For meeting the 5304.0 2652.00 2652.00

34
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revenue expenses 0
other than the bank
interest
IV) Interest on bank 858.16 463.64 394.52
borrowing

V) Interest on Bonds 70.11 70.11 0.00

VI)Interest on short 90.00 45.00 45.00

term loan
VII)Repayment of 6900.0 3900.00 3000.00
short term loan 0

VIII) Carryover 1257.8 465.81 792.06

Charges of Wheat 7
IX)Repayment of 976.50 976.50 0.00
Bonds
Total 46400. 30453.71 15946.44
15

35
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14. GROSS INFLOW:

Rs. Crores
Particulars Total For Quarter
April- ending
Sept.2010
April July 2010 -
2010- Sept.2010
June
2010
Sale of 11609.76 5785.26 5824.50
Food grain
Subsidy 26000.00 13000.00 13000.00
from GOI
Annexure-
VII
Addl. 10000.00 10000.00 0.00
Subsidy
from GOI
Receipts 6900.00 3900.00 3000.00
from STL
Total 54509.76 32685.26 21824.50
15. NET FUND FLOW:

15.1 The bank overdraft is estimated at Rs.24616.61 crores as on 31st

March 2010 after adding interest for the month ending March 2010.
Monthwise estimated fund flow during the period ending six months
April/September 2010 is given below:

MonthCCash Credit DrawingRReceipts Month end

/Year at the s During during the projected
beginning the month cash credit
of the Month utilization
month Rs.CroreRRs.Crore R Rs.Crore
R Rs. Crore
Apr, 24616.61 14566.83 126730.83 12452.61
10
NMay,1 12452.61 9089.47 6106.75 18559.37
0
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DJun, 18559.37 6797.42 3825.69 22385.06

10
,JJul, 10 22385.06 5898.10 15945.23 12337.92
AAug,1 12337.92 5322.85 3060.66 14600.12
0
Sep,1 14600.12 4725.49 2818.61 16507.00
0

15.2 Summary Cash Flow forecast for the period from 1st April, 2010 to
30th September 2010 is given in Annexure-VII.

16. CASH CREDIT LIMITS REQUIRED:

As per the estimates given in foregoing paras the operating cash

credit limit required from April 2010 onward would be as under:-

Rs.Crores
Month CC Limit
proposed
4/2010 12452.61
5/2010 18559.37
6/2010 22385.06
7/2010 12337.92
8/2010 14600.12
9/2010 16507.00

The cash credit limits indicated above may be considered by the State Bank
of India for sanction for Rabi, 2009 subject to usual review on monthly
basis.

CASH FLOW (KHARIF)

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1. INTRODUCTION:

The Food Corporation of India has been set up under an Act of Parliament
primarily:-
a. to provide price support to farmers so that they get remunerative
prices for their produce,

b. to make available foodgrains at reasonable price to consumers,

particularly to the vulnerable sections of the Society and,

c. to maintain buffer stocks as a measure of food security not only

to impart inter seasonal stability but also to meet the emergent
situations arising out of crops failure due to drought, floods, etc.

2. WORKING CAPITAL:

To achieve these objectives, the Corporation undertakes procurement,

storage, movement and distribution of foodgrains on a massive scale.
The requirement of working capital for these gigantic operations is met by
the consortium of banks led by SBI under the directions of the Reserve
Bank of India. The quantum of working capital requirement for the
ensuing Kharif foodgrains operations has been projected keeping in view
the policies of the Government announced from time to time. The gross
outflow of funds for this purpose is estimated at Rs.56169 crores
against inflows of Rs.32854 crores during October, 2009 to March,
2010.
The Govt. of India has issued a single default guarantee of Rs.34495
crores (enhanced from Rs.33100 crore) to SBI w.e.f. 07.05.2007 and
valid up to 31.03.10 covering the entire food credit of the Corporation.
The State Bank of India is however still fixing the drawing power of the
Corporation equivalent to value of stock , which is resulting in charging of
penal interest on drawing in excess of stock value inspite of the full
security being available in the form of Govt. guarantee.
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3. CURRENT CASH CREDIT UTILISATION:

The Cash Credit limit authorized to the Food Corporation of India by the
Reserve Bank of India was Rs.30348 crores (up to April, 2005). The
Reserve Bank of India vide its letter dated 2.09.05 has informed that
henceforth State bank of India will take care of the credit requirements of
the Corporation. Accordingly, the State Bank of India has authorized the
Cash Credit Limit of Rs.18972.40 crores for the month of August,
2009.The actual Cash Credit Utilization at the end of August, 2009 at
Rs.16902.75 crores

7. REVENUE EXPENSES:
The revenue expenses for the six months period have been projected at
Rs.3972.00 crores.

8. INTEREST:
The interest on bank borrowings has been considered at 10.25% up to
the value of projected stock to be held by the Corporation for the
period Oct. 09 to March, 10.

9. OFFTAKE:
The issue of Wheat and Rice has been projected at 63.91 lakh tonnes
and 109.93 lakh tonnes respectively during the period Oct. 09 to
March 2010.

10. FOOD SUBSIDY:

The Food Subsidy to the extent of Rs.17719 crores receivable during

the next six months period has been considered.
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11. STOCKS:

a. The stock with FCI as on 31.3.2010 and the value thereof at

average acquisition cost is estimated as
Under:

Qty. Lakh Tonnes

Rate Rs. per Qtls.
Amount Rs. Crore
Commodity Qty. Rate Amount
Wheat 96.13 1237.6 11897.0
0 5
Rice 185.8 1640.3 18410.4
0 8 2
Total 281.9 30307.4
3 7

b. The month end stock levels of wheat and rice from October, 2008
to September, 2009 and the expected stock level during the
period from 1.10.2009 to 31.3.2010

14.GROSS OUTFLOW:

The estimated gross fund requirement for food grains operations from
1.10.2009 to 31.3.2010 will be as follows :-
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Amount Rs. Crore

Sl. Particulars Total Oct. Quarter Quarter
No. 2009 ending ending
March Dec. March
2010 2009 2010
1. Takeover of 7164.00 3682.00 3482.00
wheat
2. Procurement of 30178.00 10498.00 19680.00
Rice (including
Paddy, Levy and
Custom Milled
Rice)
3. For meeting 3972.00 1986.00 1986.00
revenue
expenses other
than Bank
Interest
4 Carry over 521.00 196.00 325.00
charges on
Wheat
5 Re-Payment of 9450.00 6450.00 3000.00
Short Term Loan

6 Repayment of 3100.00 0.00 3100.00

Bonds
7. Interest on Bank 1090.00 361.00 729.00
Borrowings

8 Interest payable 559.00 272.00 287.00

on Bonds
9 Interest payable 135.00 90.00 45.00
on Short Term
Loan
TOTAL 56169.00 23535.00 32634.00
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15. GROSS INFLOW:

Amount Rs. Crore

Sl.N Particulars Total Quarter Quarter
o. 1.10.200 ending ending
9 to December March
31.3.201 2009 2010
0

1. Sale of Food 9135.00 4177.00 4958.00

grains
2. Subsidy from 17719.00 12327.00 5392.00
Govt. of India
3. Receipt from 6000.00 3000.00 3000.00
Short Term
Loan
TOTAL 32854.00 19504.00 13350.00

16. NET FUND FLOW:

The Bank borrowing is Rs.15741 crores as on 1.10.2009 (after adding

interest for the month ending Sept., 2009). Monthwise estimate of
fund flow during the period October, 2009 to March, 2010 is given
below :-
Amount Rs. Crore
Month Cash Credit at Drawin Receip Month
the beginning gs ts end
during during cash
the the credit
month month
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Oct. 2009 15741 6629 11710 10660

Nov. 2009 10660 5673 2366 13967

Dec. 2009 13967 11231 5428 19770
Jan. 2010 19770 11462 8032 23200
Feb. 2010 23200 12505 2621 33084

Mar. 2010 33084 8669 2697 39056

17. CASH CREDIT LIMIT REQUIRED:

As per estimate given in the foregoing paragraphs, the cash credit

limit required from October, 2009 onward would be as under :
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Amount Rs. Crore

Month CC Limit
Oct. 2009 10660

Nov. 2009 13967

Dec. 2009 19770

Jan. 2010 23200

Feb. 2010 33084

Mar. 2010 39056

CONCLUSION AND RECOMMENDATION

Financial analysis is analysis of financial statements of and

enterprise. Financial statement reorganized collection of data according to logical and
constituent accounting procedures. How ever financial statements in their traditional
from giving historical data and information are of little us to these who use them to
draw certain conclusion.
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Financial appraisal is scientific evaluation of profitability and

financial strength of any business concern. Financial appraisal techniques include ration
analysis common size analysis trend analysis, fund flow analysis etc. these techniques
may be applied in the financial appraisal of any entity and FCI Ltd.. Is no exception to it.

PROFITABILITY

The measurement of profitability is a tool of overall measurement of efficiency an

overall study profitability of FCI has been Dade in relation to sales operating assets
capital employed and its net worth.
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By analysis the working result i.e. Profit and loss account of FCI. It was found that the
net profit before interest and tax of the FCI is showing increasing trends. This is very
good for FCI. The increase in the profits is nearly 24% more then previous year the
reason is good sales growth between years. For this following suggestion should be
considered.

 Proper cost control is required and cost control technique should be adopted for
it.
 Operating expenses, admn. Expenses should be specially considered to be
reduced.
 Inventory is the biggest items of balance sheet that must have demanded a large
amount of maintaining cost. So efficient inventory management should be done.
Inventory should be reduced extent that would help to recover blocking money in
inventory.
 The service staff should be given proper training and better environment for work.
 Proper advertisement and sales promotion is required.
 Dairy has to pay large fix interest charged. Hence long term borrowing should be
reduced so that the earning are satisfactorily earmarked with them.

Working capital

 In the year 2006-2007 the growth in working capital was 43.33%As compare to
the year 2005-2006 similarly working capital in the year 2007-2008 has grown to
100.03% as compared to the working capital in the year 2005-2006. The
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management should follow the same trend in near future too so to have
considerable appreciation in working capital every year.

 The Current Ratio for the year 2007-2008 has taken the Value of 2.01:1, which is
very satisfactory and as per the standard required (2:1).The current ratio of 2.01:1
indicates, that for every Rs 1 of current liability the company Rs 2 of current
assets, which indicates more liquidity and hence more amount of working capital.
The company need to further enhance the value of ratio.

• Quick ratio for the year 2008-09 is above the ideal standard (1:1). It is 1.04:1,
which indicates that for every Re1 of current liability the company has Rs 1.04 of
current assets, hence the company is in sound position in terms of working capital
position. It would be better for the company if in near future it could further
enhance the value of the ratio

• Absolute quick ratio for the years right from 2005 up to 2008 are close to the
standard. For year 2007-08, the ratio is well above the standard (0.5:1), which
indicates the healthy picture of the company in terms of availability of working
capital (quick assets) in order to meet current liabilities. The same position should
be sustained in near future too.
SHIVAM DUA

• As compared to year 2005-2006, in the year 2006-07, the inventory turnover

increased to 8.19 times. Similarly, in the year 2007-08 it increased to 8.59 times,
which indicates that the times taken in converting raw material into finished
product and finally selling it got reduced considerably and hence indicates quick
release of working capital. In near future it would be more profitable for the
company, if the value of ratio gets increased to 11- 14%.

• In spite of an increase in Net Working Capital, the Working capital turnover ratio of
FCI got reduced to 10.8 times in the year 2006- 2007, as compared to the year
2005-07. Similarly, in the year 2007-08, the working capital turnover ratio further
reduced to 8.8 times as compared to 13.24 times in the year 2005-06. The
reduction in working capital turnover ratio is on account of massive growth in net
working capital as compared to a slight growth in the sales of the company. The
value of ratio could be better in near future , if the growth in sales matches with
the growth in net working capital.
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LIMITITATIONS

Following were some o the limitations faced during the training, in

completely understanding the various processes & operations:

1. Insufficient information supplied by the corporation.

2. Conservativeness of the corporation.

3. Godowns & other storage locations are far away from the
Head-Quarter, making it difficult to collect all the necessary
information regarding actual procurement & storage status.

4. The staff of the department of finance was due to work over-

load, too busy to spend enough time, in helping in the
preparation of the project.

5. In the corporation, there is top-level secrecy in matters

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REFRENCES

 I.M.Pandey, (1978), financial management, Ninth addition, UBS Publication New

Delhi.
 Van Horn,(2002),Financial Management and Policy,12 th edition, Publisher Dorling
Kindersley India ltd.
 Horne Wwachonicz, J.R.Bhaduri (2005), Fundamentals and Financial management,
12th edition, Pearson publisher.
 MY Khan, P.K.Jain (1981), Financial Management,5 th edition, Publisher Mc graw
hill companies.

 Financial statement for the year ended 2007-08 as obtained from FCI
 Annual-Report 2006-07 of FCI
 Study module on financial management

 Financial dailies.
 Economic Times
 Business Standard
 Business Magazines
 Business India
 Business World
 Internet Portals:
 www.fciweb.nic.in
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 www.wikipedia.com