Panel for FCI to move out of grain-surplus states

By: | Updated: January 20, 2015 5:06 AM

Suggests agency limit its focus on states that have low procurement levels

Food Corporation of India, FCI, grain procurement, Bihar, Uttar PradeshA high-level committee has recommended the Food Corporation of India (FCI) cede its role in grain procurement, storage and transportation substantially to state government agencies and the private sector.

A high-level committee has recommended the Food Corporation of India (FCI) cede its role in grain procurement, storage and transportation substantially to state government agencies and the private sector.

According to sources, the panel, headed by former Union food minister and BJP leader Shanta Kumar, suggested FCI could restrict its procurement operations to large states like Bihar and Uttar Pradesh where farmers often resort to distress sale at prices 20-25% below the minimum support price (MSP) and exit key producer states Punjab and Haryana where state agencies are well-equipped to do the job.

Additionally, in its report to be submitted to Prime Minister Narendra Modi in a couple of days, the panel is also learnt to have proposed that food subsidy disbursal via direct cash transfer be fully rolled out aggressively, starting with big cities and grain-surplus states where it would be easier.

Expenditure on FCI’s operations is estimated to be a whopping R93,000 crore this fiscal, 80% of the Centre’s budgeted food subsidy. The panel reckons that major savings on this could be achieved if the corporation’s role is curtailed and redeployed to places where it is most needed. At the same time, private players could be roped in through competitive bidding to ramp up the country’s dismal foodgrain storage and handling facilities.

Food Corporation of India, FCI, grain procurement, Bihar, Uttar Pradesh

Currently, the FCI holds excessive grain stocks — 50 million tonnes (mt) at the start of January against buffer stock requirement of 21 mt. The UPA government had asked the corporation to augment stocks in anticipation of a huge increase in grain requirements under the food security law. The corporation has of late made some efforts to cut carrying costs by reducing procurement and offloading a portion of the excess wheat stocks in the open market, but found there are not enough takers.

If the Central Warehousing Corporation and state warehousing corporations, besides the private sector, are entrusted with grain storage and transportation wherever feasible, FCI would nor need to keep stocks much above buffer norms as at present, the panel noted.

Competitive bidding for creating storage and transportation facilities would ensure efficiency in the cost of creating such vital infrastructure.

Another key recommendation of the panel is to reduce the huge burden of taxes that virtually drives away private players from buying rice and wheat in the mandis in grain-surplus states like Punjab and Haryana. The committee has also recommended implementing MSPs for crops such oilseeds and pulses for reducing the country’s import dependence on these crops. The government announces MSPs for 23 crops while only rice and wheat are procured by agencies, leading to a distorted pattern of cultivation.

FCI has storage capacities of more than 60 million tonnes and a large segment of this covered and plinth (CAP), where grain can not be stored for longer periods.

Punjab, Haryana, Madhya Pradesh, Rajasthan, Andhra Pradesh, Chhattisgarh and Odisha are the grain-surplus states.

The leakage from the targeted public distribution system is still around 40% of the 35- 40 million tonnes of grain meant for the system.

The panel consists of FCI chairman and managing director C Viswanath; electronics & IT secretary Ram Sewak Sharma; former CACP chairman Ashok Gulati; IIM-A dean G Raghuram; and dean, School of Economics, University of Hyderabad, Gunmadi Nancharaiah.

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