FCI a complete failure, needs overhaul: Panel

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New Delhi | Published: January 22, 2015 1:49:29 AM

Just 6% farmer gain from MSP, over 47% diversion of PDS grain

FCI should enter intro agreements with states before every procurement season on costing norms and other rules, making it conducive for private players to play a meaningful role in procurement. (Reuters)FCI should enter intro agreements with states before every procurement season on costing norms and other rules, making it conducive for private players to play a meaningful role in procurement. (Reuters)

Nearly half a century after the Food Corporation of India (FCI) was formed with the express objective of providing price support to farmers and making available subsidised grain to the needy, not even 10% of the country’s farmers are able to sell wheat and paddy directly to any procurement agency and close to half of the grain meant for the public distribution system (PDS) gets diverted.

Highlighting this as proof of FCI failing its objectives, a high-level committee has recommended that the corporation move out of those states that are grain surplus and/or with relatively strong procurement systems, and focus on eastern Uttar Pradesh, Bihar and West Bengal where farmers are forced to sell their produce at below minimum support prices (MSPs) in a new avatar as an agency intent on bringing competition in the sector with innovative food management practices.

In its report submitted to the PM on Wednesday, the committee, headed by former food minister and veteran BJP leader Shanta Kumar, recommended that FCI should desist from the practice of unbridled grain purchases from surplus states like Punjab, Haryana, Madhya Pradesh, Chhattisgarh, Andhra Pradesh and Odisha and accept only the surplus after deducting the needs of the respective state under the National Food Security Act (NFSA).

FCI

FE first reported this on Tuesday. The PM asked the food ministry for its comments so that the report can be implemented in a time-bound manner, a PMO release said.

Making a set of recommendations that could have a salutary impact on India’s rising food subsidy levels, the committee said the cash transfer scheme for disbursal of food subsidy should be ushered in gradually, starting soon with cities with 1 million-plus population and extending it immediately to grain-surplus states and, later, giving the choice to deficit states to opt for cash transfer or grain disbursal.

The committee estimated that the cash transfer system can result in savings of Rs 30,000 crore annually to the Centre.

Statutory levies that jack up procurement cost should be reduced to 3-4% from a range of 2-14.5% now and the should be included in MSP itself, it said.

FCI should enter intro agreements with states before every procurement season on costing norms and other rules, making it conducive for private players to play a meaningful role in procurement. Stating that during the last five years, on average, FCI’s grain stocks have been more than double the buffer stocking norms, causing a huge drain on the exchequer, the panel argued for a proactive stock liquidation policy, adding that the food ministry and FCI should work cohesively to promptly dispose of the stocks whether through domestic open market sales or exports.

Stating that the underlying reasons for the messy state of India’s PDS starts with export bans to open-ended procurement with distortions (through bonuses and high statutory levies), the committee called for reducing the coverage of the NFSA from 67% envisaged at present to 40% of the population which, it said, would comfortably cover families below the poverty line and some even above that. The committee noted that 5kg grain per person to priority households, as envisaged in NFSA, is actually making BPL households worse off, who used to get 7kg per person under the TPDS, and said that once the coverage is reduced, the entitlement could be raised to the previous level.

The implementation of the the Act could be deferred in states that are not sufficiently prepared and are yet to complete end-to-end computerisation, the panel said. As many as 11 states, it may be noted, have already rolled out the NFSA and others have been told to sign up by April 2015.

With regard to reorienting FCI, the committee said it should outsource stocking operations to central and state warehousing corporations and the private sector and proposed a trimming of FCI, where some workers got an astounding Rs 4 lakh-plus in August. FCI should be allowed to hire people under direct payment system and on a no-work-no-pay basis, even while giving these contract workers better facilities, the panel noted.

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