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7 PM Editorial |A grain stockist with a role still relevant| 5th May 2020

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A grain stockist with a role still relevant

 What has happened?

The Centre, for the first time in the FCI’s history, has decided to supply rice and wheat at a lower price to prevent hunger pangs among the rural and urban poor, mainly migrant labour and BPL families, during the lockdown announced to prevent the spread of COVID-19 pandemic.

This brings us to the questions regarding Food Corporation of India (FCI). In this article we will discuss the following:

  • What is Food Corporation of India (FCI)?
  • What is the working Mechanism of Food Corporation of India (FCI)?
  • In what ways FCI could disperse the food grains speedily and cost effectively in present scenario?
  • Conclusion
What is Food Corporation of India (FCI)?
  • The Food Corporation of India was setup under the Food Corporation’s Act 1964.
  • It was set up in order to fulfill following objectives of the Food Policy:
  • Effective price support operations for safeguarding the interests of the farmers.
  • Distribution of food grains throughout the country for public distribution system.
  • Maintaining satisfactory level of operational and buffer stocks of food grains to ensure National Food Security.
  • Since its inception, FCI has played a significant role in India’s success in transforming the crisis management oriented food security into a stable security system.
  • FCI’s Objectives are:
  • To provide farmers remunerative prices
  • To make food grains available at reasonable prices, particularly to vulnerable section of the society
  • To maintain buffer stocks as measure of Food Security
  • To intervene in market for price stabilization
What is the working Mechanism of Food Corporation of India (FCI)?

Procurement:

  • FCI, the nodal central agency of Government of India, along with other State Agencies undertakes procurement of wheat and paddy under price support scheme.
  • The Government policy of procurement of Food grains has broad objectives of ensuring MSP to the farmers and availability of food grains to the weaker sections at affordable prices.
  • It also ensures effective market intervention thereby keeping the prices under check and also adding to the overall food security of the country.
  • Before the harvest during each Rabi / Kharif Crop season, the Government of India announces the minimum support prices (MSP) for procurement on the basis of the recommendation of the Commission of Agricultural Costs and Prices (CACP) which along with other factors, takes into consideration the cost of various agricultural inputs and the reasonable margin for the farmers for their produce.

Stock:

  • Food grain stocking norms refers to the level of stock in the Central Pool that is sufficient to meet the operational requirement of food grains and exigencies at any point of time. Earlier this concept was termed as Buffer Norms and Strategic Reserve.
  • The storage function assumes paramount importance in organization such as Food Corporation of India because of its requirement to hold huge inventory of food grains over a significant period of time.
  • Storage plan of FCI is primarily to meet the storage requirement for holding stocks to meet the requirements of Public Distribution System and Other Welfare Schemes undertaken by the Government of India.
  • Also, buffer stock is to be maintained for ensuring food security of the nation.
  • Adequate scientific storage is pre-requisite to fulfill the policy objectives assigned to the Food Corporation of India for which FCI has a network of strategically located storage depots including silos all over India.

Sell:

  • Government of India fulfils the objectives of food security through the Public Distribution System.
  • Public Distribution System strives to meet the twin objectives of price support to the farmers for their product and supply of food grains at affordable prices.

Transport:

  • Movement plays a very important role in the working of FCI as well as in fulfilling the objectives of Food Policy and National Food Security Act.
  • FCI undertakes movement of food grains in order to:
  • Evacuate stocks from surplus regions
  • Meet the requirements of deficit regions for National Food Security Act/ Targeted Public Distribution System and Other Schemes
  • Create buffer stocks in deficit regions
  • On an average 40 to 42 million tonnes of food grains are transported by FCI across the country in a year. FCI undertakes massive movement operation of food grains all over the country.
  • Movement of food grains is undertaken by Rail, Road and Waterways. Around 85% of stocks are moved by rail to different parts of the country.
  • Inter-State movement by road is mainly undertaken in those parts of the country which are not connected by rail.
  • A small quantity is also moved by ocean vessels to Lakshadweep and A&N Islands as well as through coastal shipping and riverine movement to Kerala/Agartala (Tripura).

 Finances:

  • Main operation of FCI includes procurement of food grains at minimum support price declared by Government of India, store food grains so procured, transport the surplus food grains to deficit states and issue it to State Governments under Public Distribution System at a price decided by the Government of India.
  • Since, the issue prices declared by Government of India under different schemes are much lower than the cost of food grains procured; the differential amount is reimbursed to FCI as food subsidy by the Government of India.
  • FCI also maintains buffer stocks of food grains as mandated by the Government of India and intervene in the domestic market to control the rising prices of the food grains.
 In what ways FCI could disperse the food grains speedily and cost effectively in present scenario?
  • Use of Roads for transportation:
  • The FCI ha long back recognized the road movement as better suited for emergencies and for remote areas.
  • However, in 2019-2020 (until February) only 24% of the grains moved by road.
  • FCI needs to increase the use of roads more imperatively to move grains with least cost and efforts to the remote areas where the need is greatest
  • Decentralized storage: In the current context, it would be useful for the State government and the FCI to maintain stocks at block headquarters or panchayats in food insecure or remote areas.
  • Fiscal Burden: The centre should release stocks over and above existing allocations under PDS and Pradhan Mantri Garib Kalyan Yojana, but at its own expenses rather than by transferring the fiscal burden to States.
  • Activating Vibrant Network: In many States, there is a vibrant network of self-help groups formed under the National Rural Livelihoods Mission (NRLM) which can be tasked with last mile distribution of food aid other than the PDS. Consultative committees presumably exist already in each State to coordinate with the FCI on such arrangements.
  • First in, First out (FIFO) principle: Typically, the FCI’s guidelines follow a first in, first out principle (FIFO) that mandates that grain that has been procured earlier needs to be distributed first to ensure that older stocks are liquidated, both across years and even within a particular year. It is time for the FCI to suspend this strategy, which will enables movement that costs least time, money and effort.
  • Farmer Producer Organisations (FPOs):
  • The FCI along with the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) has required expertise to manage the logistics to help farmers across the country to reach out to consumers directly.
  • The FCI should consider expanding its role to support FPOs and farmer groups, to move a wider range of commodities including agricultural inputs such as seeds and fertilizers, packing materials

Conclusion:

There is no doubt that the FCI needs to overhaul its operations and modernise its storage. At the same time, the relevance of an organisation such as the FCI or of public stockholding, common to most Asian countries, has never been more strongly established than now, even as we contemplate its new role in a post-pandemic world. 

Source: A grain stockist with a role still relevant

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