- Food Corporation of India
- Status Quo
- Transport of grains
- Positioning strategy
- Flexibility of Local government
- Extend Support to FPOs
- Concerns regarding FCI’s role
Role of FCI amidst COVID-19 pandemic
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The Food Corporation of India (FCI) was set up in 1965 under the Food Corporation Act, 1964 against the backdrop of major shortage of grains, especially wheat, in the country. FCI has been at the forefront of India’s quest of self-sufficiency in rice and wheat following the Green Revolution, managing procurement and stocking grain that supported a vast Public Distribution System (PDS).
Food Corporation of India:
- FCI is a statutory body under the Ministry of Consumer Affairs, Food and Public Distribution, Government of India.
- The FCI procures rice, wheat and coarse grains from farmers through many routes like paddy purchase centres/mill levy/custom milling and stores them in depots.
- The stocks are transported throughout India, issued to the state government nominees at the rates declared by the Government of India for further distribution under the Public Distribution System (PDS) for the consumption of the ration card holders.
- Notwithstanding its dubious reputation, the FCI has consistently maintained the PDS, a lifeline for vulnerable millions across the country.
- Today, in the middle of the COVID-19 pandemic, it holds the key to warding off a looming crisis of hunger and starvation, especially in regions where lakhs of migrant workers have returned with little in hand by way of money or food.
- Before the lockdown, many experts had observed that with 77 million tonnes of grains in its godowns and on the eve of a new round of procurement — of a bumper harvest of wheat — the FCI was facing a serious storage problem.
- This was worrying as FCI lacked a “pro-active liquidation policy” for excess stocks.
- However, this concern has disappeared temporarily, and many have called for opening up the godowns to release food stocks to those affected by the lockdown.
- As of April 13, 2020, the FCI had already moved 3 million tonnes (post-lockdown), to States, including Uttar Pradesh, Bihar, West Bengal and Karnataka and those in the Northeast, where demand outstrips within State procurement and/or stocks.
- The FCI has also enabled purchases by States and non-governmental organisations directly from FCI depots, doing away with e-auctions typically conducted for the Open Market Sale Scheme (OMSS).
Transport of grains:
- Given the extended lockdown, the FCI is uniquely positioned to move grain across State borders where private sector players continue to face formidable challenges.
- With passenger rail and road traffic suspended, grain can move quickly without bottlenecks.
- FCI is overwhelmingly reliant on rail, which has several advantages over road transport.
- In 2019-2020 (until February) only 24% of the grain moved was by road.
- The FCI has, however, long recognised that road movement is often better suited for emergencies and for remote areas.
- Containerised movement too, which is not the dominant way of transporting grain, is more cost-effective and efficient.
- The coming months will see predictable demand for staples from food insecure hotspots where migrant workers have just returned or where work is scarce.
- The strategy that can be adopted is “pre-positioning” shipments, where grain is stored closer to demand hotspots.
- The FCI already has a decentralised network of godowns.
- It would be useful for the State government and the FCI to maintain stocks at block headquarters or panchayats in food insecure or remote areas that would allow State governments to respond rapidly.
Flexibility to Local government:
- There is a strong case for the central government to look beyond the PDS and the Pradhan Mantri Garib Kalyan Yojana and release stocks over and above existing allocations, but at its own expenses rather than by transferring the fiscal burden to States.
- Along with a prepositioning strategy, this would provide flexibility to local governments to access grains for contextually appropriate interventions at short notice, including feeding programmes, free distribution to vulnerable and marginalised sections, those who are excluded from the PDS, etc.
- It also allows freedom to panchayats, to sell grain locally at pre-specified prices until supply is restored.
- In many States, there is a vibrant network of self-help groups formed under the National Rural Livelihoods Mission (NRLM) which can be tasked with last mile distribution of food aid other than the PDS.
- Consultative committees presumably exist already in each State to coordinate with the FCI on such arrangements.
Extend support to FPOs:
- The FCI’s guidelines follow a first in, first out principle (FIFO) that mandates that grain that has been procured earlier needs to be distributed first to ensure that older stocks are liquidated, both across years and even within a particular year.
- It is time for the FCI to suspend this strategy, if it has not already, that enables movement that costs least time, money and effort.
- Farmers across the country growing for markets are seeking to reach out to consumers directly, many out of sheer despair.
- In many places, farmer producer organisations (FPOs) have been at the forefront of rebuilding these broken supply chains.
- The FCI along with the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED), is well placed to rope in expertise to manage the logistics to support these efforts.
- NAFED has already taken the initiative to procure and transport horticultural crops. Several State governments too have put in systems to procure horticultural crops.
- The FCI should similarly consider expanding its role to support FPOs and farmer groups, to move a wider range of commodities including agricultural inputs such as seeds and fertilizers, packing materials and so on.
Concerns regarding FCI’s role:
- There is a long-term concern regarding the costs of food subsidy.
- An analysis of FCI costs spanning 2001-16 suggest that on average about 60% of the costs of acquisition, procurement, distribution and carrying stocks are in fact transfers to farmers.
- At the same time, the government needs to address the FCI’s mounting debts — an estimated ₹2.55 lakh crore in March 2020 in the form of National Small Saving Funds Loan alone — and revisit its current preference for not liquidating these in order to contain the Union government’s fiscal deficit.
- A second concern is that extended food distribution of subsidised grain is akin to dumping and depresses food prices locally, in turn affecting farmers.
- Some clarity on this aspect would enable the government to be bolder with deploying the FCI in the best possible way.
There is no doubt that the FCI needs to overhaul its operations and modernise its storage post pandemic and in the long term. However, it cannot be denied that the relevance of an organisation such as the FCI or of public stockholding, has never been more strongly established than now. The organisation holds the key to warding off a looming crisis of hunger and starvation.