FCI under stress for rising procurement/distribution costs

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November 02, 2019 12:23 AM

While India has been recording higher output each year (2018-19 is the third year of bumper output) stocks in central pool have also been increasing.

agriculture, agriculture sectorCommission of Agricultural Costs and Prices is right in suggesting a review of the open-ended procurement.

The Commission of Agricultural Costs and Prices (CACP), in its report for the rabi 2020-21 season has raised an alarm over Food Corporation of India’s open-ended policy. The report highlights that foodgrain stocks, till October 1, in the central pool—at 64.2 million tonnes—were 109% more than the buffer requirement. While India has been recording higher output each year (2018-19 is the third year of bumper output) stocks in central pool have also been increasing.

This has contributed to additional burden for the Food Corporation of India as economic costs of procurement and distribution have been increasing as well. More important, Minimum Support Price (MSP), in certain years, trending above the market price has led to the burden on Food Corporation of India growing manifold. However, this is not the case for this year, data for pulses indicates prices dipping much below the MSP. Thus, the Commission of Agricultural Costs and Prices is right in suggesting a review of the open-ended procurement.

But the government also needs to review its MSP policy. With the subsidy bill doubling from Rs 92,000 crore in FY14 to Rs 1,71,298 crore in FY19, and Food Corporation of India debt at Rs 200,000 crore, with an additional Rs 80,000 crore of short-term debt, there is very little wiggle room for the government and Food Corporation of India.

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