FCI reform: Paswan rolls out Rs 6,000 crore plan to build silos

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Updated: June 8, 2019 8:50:54 AM

The government’s food subsidy bill — budgeted at Rs 1.84 lakh crore for FY20 — would come down by close to a third if the current public procurement+distribution system is replaced with more cost-effective alternatives such as direct cash transfers (DBT) and food stamps/vouchers/coupons.

FCI reform, Ram Vilas Paswan, direct cash transfers, food subsidy bill, NSSF loan, NSSF act, Antyodaya Anna Yojana The food ministry has also sought Cabinet approval for a plan under which one kg of sugar will be sold through the ration shops to an additional 16.3 crore families at a subsidised rate of Rs 13.50/kg.

The Food Corporation of India (FCI) will have modern silos with carrying capacity of 100 lakh tonne by 2022-23, up from less than 7 lakh tonne now, food and consumer affairs minister Ram Vilas Paswan said on Friday. The silos project will require capital investment to the tune of Rs 6,000 crore. While the move will help reduce carrying cost of grains — a staggering Rs 25,000 crore annually at last count — and reduce the storage losses, it is barely radical reform.

The government’s food subsidy bill — budgeted at Rs 1.84 lakh crore for FY20 — would come down by close to a third if the current public procurement+distribution system is replaced with more cost-effective alternatives such as direct cash transfers (DBT) and food stamps/vouchers/coupons.

Also read: NSSO survey reveals positive shift; jobs moving from farming to manufacturing, services

Thanks to the procurement system, FCI and other agencies hold extra stocks (over and above the buffer required) in most parts of the year. As reported by FE recently, these agencies among them were holding excess food grain stocks worth Rs 1.18 lakh crore (economic cost) on April 1, 2019, in the ‘central pool.’ This was even as fiscally-stressed Centre’s food subsidy dues to FCI were close to a staggering Rs 2 lakh crore at the start of this fiscal. For the third year in a row, FCI had to force the corporation to tap the National Small Savings Fund (NSSF) loan. FCI borrowed an additional Rs 60,000 crore from the NSSF in April 2019 to ensure its operations under the National Food Security Act are not disrupted.

Currently, under the National Food Security Act, over 80 crore people get 5 kg of wheat/rice every month at a highly subsidised rate of Rs 2-3/kg. Sources said the government is also planning to offload about 8-9 million tonne (mt) of food grains from the surplus stocks to provide additional up to 2 kg of rice or wheat to the population covered under NFSA for the next six months. This could inflate the annual subsidy bill by some Rs 25,000 crore.

The food ministry has also sought Cabinet approval for a plan under which one kg of sugar will be sold through the ration shops to an additional 16.3 crore families at a subsidised rate of Rs 13.50/kg. This will cost the exchequer Rs 4,727 crore. Currently, sugar is distributed at Rs 13.5/kg to 2.5 crore families under the Antyodaya Anna Yojana (AAY).

In his first interaction with media after assuming charge of the ministry, Paswan also said that FCI has been discussing with various labour unions in the organisation to create a single category of labour in place of current three — departmental workers, direct payment system and no work no pay.

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