Food Corporation of India (FCI) : Issues

Recently the recommendations of the High Level Committee (HLC) to restructure, reorient and reform the Food Corporation of India (FCI) was made public. Critically comment on its recommendations. (200 Words)

As an initial step to secure the four pillars of food security viz. availability, affordability, accessibility and stability the FCI was setup in 1964 . However the shortfalls of FCI in its 3 major objectives of procurement, storage and distribution, lead to formation of the Shanta Kumar committee for FCI restructuring.
Some of the progressive recommendations include:
  1. Procurement Payment reforms: Popularize NWRs
  2. Buffer stock reforms: Whenever FCI has grains above buffer norms, it should automatically sell excess stock in open market ―Pro-Active Liquidation Policy.
  3. Storage reforms: End to End computerization and Online tracking of entire system from procurement to retail distribution.
  4. Transport reforms : Improved night security at rail-points, because >85% of PDS Grain is transported through railways and maximum siphoning off occurs here. Use of inland waterways where possible
Though some of its recommendations appear progressive, most of its reforms have been debated and criticized on various grounds:
  • Survey : Committee report says only 6% farmers benefited from MSP procurement regime and nearly 50% of the food grains are siphoned off from PDS system But experts dispute the NSSO-survey methodology used in deriving these numbers.
  • Cutting down NFSA : Many poor families will be deprived of their basic right to food.
  • Recommends FCI to hire contractual staff, close regional offices and give VRS to employees. Trade union leaders are in opposition to this.
  • Privatization : though many farmers have not benefited from public procurement, but FCI has not opened branches outside selected regions.
  • Outsourcing procurement to some states :it recommends not to do “open ended procurement” from all states, above buffer stock limits. This will catalyze distress sells and farmer suicides.
  • Direct cash transfer has its own shortfalls
Hence to achieve the target of food security, what is needed is better targeting and proper use of technology which is pro-poor
Some argue that the report of the Shanta Kumar committee on food management contains several cogent recommendations and they should be implemented to make PDS efficient. Analyse these recommendations and comment if they should indeed be implemented. (200 Words)
Shanta Kumar Committee report on food management talks about some important issues and many recommendations are being made by the committee which needs to be implemented as soon as possible.
  1. Cash Transfer : This recommendation is made by committee to stop the possible leakages and this will also save thousands of crores of money from government which can be used for expansion of facilities.
  2. Private Partnership: Private partnership has been recommended by government for procurement and for transportation , this should help in efficient use of resources and further enhancing the capability.
  3. Reduce Coverage: One of the recommendation is to reduce the coverage from 67% to 40 % which has been opposed by many parties. But this has been suggested due to the statistics which are showing that leakages are too much and most of the food is not reaching the actual beneficiaries. If we reduce the target and also focus on reducing the leakages, this should help but we need to be sure that national food security is not impacted.
  4. Procurement shift: There has been recommendation that procurement should shift to north eastern states as they don’t have the required structure. This should be implemented to help north eastern states grow.
  5. Export: The committee has suggested that the food ministry should be quick to export grains or sell them in the local market as soon as FCI procures more than the requirement. This should be implemented.
  6. Taxation : The committee has proposed uniform tax of minimum 3 % and maximum 4 % on wheat and rice and the same to be included in the MSP. This also should be implemented.
There are many recommendations which should be implemented immediately but some of them only once we are sure that we are not keep people hungry like the reduction in coverage.