role-of-fci-amidst-covid-19-pandemic

Context: The Food Corporation of India (FCI) holds the key to warding off a looming crisis of hunger and starvation amidst the Covid 19 pandemic.

Background: Evolution of FCI

  • In its first decade operations, starting from 1965, the FCI was at the forefront of India’s quest of self-sufficiency in rice and wheat following the Green Revolution, managing procurement and stocking grain that supported a vast Public Distribution System (PDS).
  • Over time, however, many began to see it as a behemoth that had long outlived its purpose. 
    • Its operations were regarded as expensive and inefficient.
    • Even in the 1970s and 1980s, poor storage conditions meant a lot of grain was lost to pests, mainly rats; 
    • Diversion of grain was widespread, prompting a problem with “human rats” as well. 
    • By the late 1990s, the FCI was often referred to as the “Food Corruption of India”, not entirely facetiously.
  • Notwithstanding its dubious reputation, the FCI has consistently maintained the PDS, a lifeline for vulnerable millions across the country. 

 

Role of FCI amidst Covid 19 Pandemic:

  • Today, in the middle of the COVID-19 pandemic, it holds the key to warding off a looming crisis of hunger and starvation, especially in regions where lakhs of migrant workers have returned with little in hand by way of money or food. 
  • Before the lockdown there was fear that excess food stock owing to a bumper harvest of wheat will create a storage problem but this issue was temporarily addressed by the lockdown.  
  • The FCI had 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 within 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). 
  • With rabi procurement under way in many States, it seems that the country will secure ample food supplies to cope with the current crisis. 
  • Given the extended lockdown, the FCI is uniquely positioned to move grain across State borders where private sector players continue to face formidable challenges. 
  • Yet, there is a widespread sense that the FCI is simply not moving fast enough and could do much more.

Improving FCI’s Role in Covid-19 crisis:

  • Revamping its Transportation Network:
    • The FCI is overwhelmingly reliant on rail, which has several advantages over road transport.In 2019-2020 (until February) only 24% of the grain moved was by road. 
    • The FCI has, however, long recognised that road movement is often better suited for emergencies and for remote areas ,therefore it is imperative to focus on this mode of transportation.
  • Adopting Pre Positioning Strategy:
    • Given that the coming months will see predictable demand for staples from food insecure hotspots where migrant workers have just returned or where work is scarce.
    • Pre-positioning shipments, where grain is stored closer to demand hotspots, must be done expeditiously.
    • 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, in small hermetic silos or containers allowing State governments to respond rapidly.
  • Support from Central Government:
    • There is a strong case for the central government to release stocks over and above existing allocations, but at its own expenses rather than by transferring the fiscal burden to the States. 
    • This would provide flexibility to local governments to access grains for contextually appropriate interventions at short notice, including feeding programmes, free distribution to vulnerable and marginalised sections, those who are excluded from the PDS, etc.; 
    • It also allows freedom to panchayats, for example, to sell grain locally at pre-specified prices until supply is restored. 
    • In many States, there is a vibrant network of self-help groups which can be tasked with last mile distribution of food aid other than the PDS. 
  • Relaxing the FIFO Principle:
    • 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 relax this strategy, if it has not already, that enables movement that costs least time, money and effort.
  • Strengthening the Supply Chain:
    • Today farmers across the country are seeking to reach out to consumers directly, many out of sheer despair
    • In many places, farmer producer organisations (FPOs) have been at the forefront of rebuilding these broken supply chains. 
    • Collaborating with the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED): NAFED has already taken the initiative to procure and transport horticultural crops. Several State governments too have put in systems to procure horticultural crops. 
    • The FCI should similarly 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 and so on. 

Impediments in improving FCI’s Role:

  • There are two major concerns that many articulate regarding the FCI’s role. 
  • The first is a long-term concern regarding the costs of food subsidy
    • An analysis of FCI costs spanning 2001-16 suggests, however, that on average about 60% of the costs of acquisition, procurement, distribution and carrying stocks are in fact transfers to farmers
    • At the same time, the government needs to address the FCI’s mounting debts — an estimated 2.55 lakh crore in March 2020 in the form of National Small Saving Funds Loan alone — and revisit its current preference for not liquidating these in order to contain the Union government’s fiscal deficit. 
    • Some clarity on this aspect would enable the government to be bolder with deploying the FCI in the best possible way. 
  • A second concern is that extended food distribution of subsidised grain is akin to dumping and depresses food prices locally, in turn affecting farmers.
  • These are legitimate concerns but perhaps only beyond the looming emergency this summer. 

Conclusion:

  • Improving FCI: The Shanta Kumar report recommended repurposing the organisation as an “agency for innovations in Food Management System” and advocated shedding its dominant role in the procurement and distribution of grain.
    • The committee recommended creating competition in every segment of the food grain supply chain, from procurement to stocking to movement and finally distribution in TPDS, so that overall costs of the system are substantially reduced, leakages plugged, and it serves a larger number of farmers and consumers. 
    • In this endeavour it will make itself much leaner and nimble (with scaled down/abolished zonal offices), focus on eastern states for procurement, upgrade the entire grain supply chain towards bulk handling and end to end computerization.
      • This could be done by bringing in investments, and technical and managerial expertise from the private sector. 
    • FCI will be more business oriented with a pro-active liquidation policy to liquidate stocks in OMSS/export markets, whenever actual buffer stocks exceed the norms. 
  • This would be challenging but the FCI can rise to this challenge and once again play its commendable role as it did during the late 1960s and early 1970s.   

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.

Food Corporation of India:

  • It is an organization created and run by the Government of India. 
  • It is a statutory body set up by the Food Corporation Act 1964 under the Ministry of Consumer Affairs, Food and Public Distribution.
  • It was set up in 1965 with its Initial headquarters at Chennai. Later this was moved to New Delhi. 
  • It also has regional centers in the capitals of the states. Important regions of the state also serve as district centers.
  • Major objectives:
    • Effective price support operations for safeguarding the interests of the poor farmers
    • Distribution of foodgrains throughout the country for Public Distribution System (PDS)
    • Maintaining a satisfactory level of operational and buffer stocks of foodgrains to ensure National Food Security
    • Regulate market price to provide foodgrains to consumers at a reliable price

 

Public Distribution System:

  • The Indian food security system was established by the Government Of India under the Ministry of Consumer Affairs, Food and Public Distribution to distribute food and non-food items to India's poor at subsidised rates
  • This scheme was first started in February 1944, during the Second World War, and was launched in the current form in June 1947. 
  • Major commodities distributed include staple food grains, such as wheat, rice, sugar and essential fuels like kerosene, through a network of fair price shops (also known as ration shops) established in several states across the country. 
  • Food Corporation of India, a Government-owned corporation, procures and maintains the public distribution system (PDS).

 

Farmer Producer Organisation:

  • It is a Producer Organisation (PO) where the members are farmers.
  • Essential features of a producer organisation:
    • It is formed by a group of producers for either farm or non-farm activities.
    • It is a registered body and a legal entity.
    • Producers are shareholders in the organization.
    • It deals with business activities related to the primary produce/product.
    • It works for the benefit of the member producers.
    • A part of the profit is shared amongst the producers.
    • Rest of the surplus is added to its owned funds for business expansion.

 

NAFED:

  • National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) is an apex organization of marketing cooperatives for agricultural produce in India, under the Ministry of Agriculture, Government of India.
  • It was founded on the birthday of Mahatma Gandhi on 2 October 1958 to promote the trade of agricultural produce and forest resources across the nation.
  • It is registered under Multi State Co-operative Societies Act.
  • NAFED is now one of the largest procurement as well as marketing agencies for agricultural products in India. 
  • With its headquarters in New Delhi, NAFED has four regional offices at Delhi, Mumbai, Chennai and Kolkata, apart from 28 zonal offices in capitals of states and important cities.
  • NAFED is the nodal agency to implement price stabilization measures under "Operation Greens" which aims to double the farmers' income by 2022.
  • In 2008, it established National Spot Exchange, a Commodities exchange as a joint venture of Financial Technologies (India) Ltd. (FTIL).

Source:

https://www.thehindu.com/opinion/op-ed/a-grain-stockist-with-a-role-still-relevant/article31504557.ece

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