Food Corporation of India (FCI)


FCI was formed in 1960’s and was part of larger plan directed toward food security and self-sufficiency. Other major institution was CACP. These two institutions along with MSP regime and Public distribution system were expected to work in tandem. FCI’s responsibility was to procure, Store and discharge grains as per policy of the government. Over the time, as in other cases these institutions too failed to adapt to changing circumstances such as changing demands of economy. As a result FCI now reels under chronic inefficiency through huge wastages, and storage cost of grains keeps on cumulating.

Critical role being played by Food Corporation of India in countering the challenges posed by COVID-19:

  • Notwithstanding its dubious reputation, the FCI has consistently maintained the PDS, a lifeline for vulnerable millions across the country.
  • Currently, in the middle of the COVID-19 pandemic, FCI with its buffer stocks holds the key to warding off a looming crisis of hunger and starvation, especially in regions where lakhs of migrant workers have returned home with little money or food.
  • The FCI has already moved 3 million tonnes (post-lockdown) to States, including Uttar Pradesh, Bihar, West Bengal and Karnataka and those in the Northeast, where demand outstrips State procurement and/or stocks.
  • The FCI has also enabled purchases by States and non-governmental organisations directly from FCI depots, doing away with e-auctions typically conducted for the Open Market Sale Scheme (OMSS).
  • Given the extended lockdown, the FCI is uniquely positioned to move grains across State borders where private sector players continue to face formidable challenges.

Concerns related to FCI

  • FCI’s operations are regarded as expensive and inefficient. There are long-term concerns regarding the costs of food subsidy.
  • The FCI has witnessed mounting debts which currently stands at an estimated ₹55 lakh crore in March 2020, in the form of National Small Saving Funds Loan.
  • FCI faces serious storage problems and is plagued by the issue of shortage of modern storage facilities. In the 1970s and 1980s, poor storage conditions meant a lot of grain was lost to pests, mainly rats.
  • There have been reports of widespread diversion of grains and high leakage losses.
  • FCI has lacked a “pro-active liquidation policy” for excess stocks which leads to market distortion in some instances. The distribution of subsidised grains is sometimes blamed for depressing food prices and affecting farmers.
  • Some experts have argued that given the increasing role of the market economy, the FCI seems to have long outlived its purpose.

Measures needed to revamp FCI

  • Use of Roads for transportation:
    • The FCI has 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

The Shanta Kumar Committee recommendations however was criticized due to suggestions like limiting NFSA, cash subsidy, privatization of FCI despite suggesting useful reforms to reform FCI, PDS. A closer scrutiny in the recommendation is needed today in times of agricultural distress & drought prone years. The FCI needs to overhaul its operations and modernise its storage.