1. Data Drive: Clear the food rot

Data Drive: Clear the food rot

Only 6% farmers have gained from selling wheat and paddy directly to any procurement agency...

By: | Published: January 24, 2015 12:27 AM

Only 6% farmers have gained from selling wheat and paddy directly to any procurement agency and the diversion of grains from the public distribution system is close to 47%. Against this backdrop, the Shanta Kumar panel’s report on reorienting the role and restructuring of Food Corporation of India (FCI) needs to be adopted by the government at the earliest and in totality. This will indeed make for huge savings to the exchequer, drastically improve the efficiency in food handling, and benefit both farmers and consumers.

In the build-up to the Food Security Act (FSA), India has accumulated food stocks in excess of the buffer norms, even as cereal inflation was at 8-12% in the last few years. The report has underlined the need to relook the FSA and suggested that the government should defer the Act’s implementation in states that have not done end-to-end computerisation.

The report has also suggested unbundling of FCI’s operations and outsourcing processes like quality assessment, storage and distribution to the private sector and state-level agencies. It has also said the corporation must phase out the procurement in surplus states and, instead, move to states like UP (eastern region), Bihar, West Bengal and Assam where farmers still sell grains below the minimum support price (MSP). The report has also called for modernisation of storage, transport and handling facilities of foodgrains.


The panel’s recommendations to revisit the government’s MSP policy will help in overhauling the country’s convoluted food subsidy regime. At present, MSPs are fixed for 23 commodities, but effectively the price support operates primarily in wheat and rice and that too in selected states.

This creates highly skewed incentive structures in favour of wheat and rice while the country is short of pulses and oilseeds, and the latter’s prices often go below the MSP without any effective price support. The government needs to encourage farmers to diversify into these crops, which, in turn, will reduce India’s import bill.


Recommendations of the HLC on restructuring of FCI

* FCI should outsource all procurement operations of wheat and paddy to states that have gained sufficient experience and move to states where farmers sale at prices much below MSP like eastern UP, Bihar, West Bengal, Assam.
* FCI to gradually outsource its stocking operations to Central Warehousing Corporation, State Warehousing Corporation and the private sector.
* The government needs to revisit its MSP policy and synchronise trade policy with MSP policy.
* Give fertiliser subsidy directly to farmers and deregulate the fertiliser sector.
* Negotiable Warehouse Receipts System to be scaled up to bring back private sector.
* Beneficiaries under the Targeted Public Distribution System (TPDS) be given six months’ ration at a time, immediately after the procurement season.


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