FCI is a Public Sector Undertaking that falls under the purview of the Department of Food & Public Distribution, which operates under the Ministry of Consumer Affairs, Food and Public Distribution.
It was established under the Food Corporation’s Act of 1964.
The main objectives of this undertaking are:
- To conduct effective price support operations.
- To distribute food grains throughout the country for the public distribution system.
- To maintain satisfactory levels of operational and buffer stocks of food grains to ensure national food security.
FCI: Relevance
- The FCI is the bedrock of the entire National Food Security Act, ensuring procurement and distribution to far-flung areas for national food security.
- During the Covid and migrant crises, the FCI tackled the challenges of hunger and starvation.
- The FCI is the bedrock of the PDS, fighting malnutrition and poverty for inclusive growth.
- The FCI purchases crops at MSP, providing financial security to farmers and making agriculture remunerative.
- Due to supply chain disruptions, lack of encouragement to private players, and high logistics costs, the FCI is performing all the essential services.
- Sixty percent of the cost of acquisition, procurement, and distribution is transferred to farmers, making the system efficient.
FCI: Challenges
- The FCI faces issues in all three areas: a) procurement, b) storage, and c) distribution.
- Less than 10% of farmers can sell to government agencies due to unawareness or lack of access to the MSP system, and only big farmers in northwest states benefit.
- The FCI has stored double the grains than the prescribed buffer limits, resulting in a shortage in the open market and inflation, as well as rotten grains due to the FCI’s limited storage capacity.
- According to NSSO 2011, 40-60% of PDS grains are siphoned off, and a former chairman of the FCI called it the “food corruption of India.”
FCI: Reforms
- Shanta Kumar Committee recommendations suggest designating the FCI as an “Agency for Innovation in Food Management Systems.”
- At the procurement stage, the recommendations include outsourcing procurement in better-performing states like Punjab but centralizing procurement in states like Bihar, Assam, Bengal, and eastern Uttar Pradesh, cash transfers to farmers, setting buffer stock quotas instead of open-ended procurement, and stringent quality checks by third parties.
- At the storage stage, the recommendations include outsourcing stocking operations to various agencies such as the Central Warehousing Corporation (CWC), State Warehousing Corporation (SWC), and the private sector under the Private Entrepreneur Guarantee (PEG) scheme, automatic liquidation of excess buffer stock in the open market, and maintaining strategic buffer reserves.
- At the distribution stage, the recommendations include covering 40% of the population under the National Food Security Act 2013, which will result in less subsidy but more quantity, end-to-end computerization, and online tracking of the entire system from procurement to retail distribution.
- The recommendations also include transportation improvements such as integrating road transport along with rail (currently there is very high dependence on rail), using containers instead of gunny bags, utilizing inland waterways, and automation in loading and unloading.
- The pre-positioning shipment policy is recommended for chronically starved areas, where food grains can be stored nearer to the target population.
- Doing away with the FIFO (first in, first out) principle is recommended to release hygienic food grains on time.
- The recommendations suggest leveraging a network of Self-Help Groups (SHGs) and Farmer Producer Organizations (FPOs) to ensure last-mile connectivity and distribution
