Shanta Kumar Committee on Restructuring of Food Corporation of India (FCI)

Introduction

•  Government of India (GoI) set up a High Level Committee (HLC) in August 2014 with Shri Shanta Kumar as the Chairman on Restructuring of Food Corporation of India (FCI). 

Term of Reference 

• To suggest restructuring or unbundling of FCI with a view to improve its operational efficiency and financial management.
  
• To suggest measures for overall improvement in management of foodgrains by FCI;
  
• To suggest reorienting the role and functions of FCI in MSP operations, storage and distribution of foodgrains and food security systems of the country;
  
• To suggest cost effective models for storage and movement of grains and integration of supply chain of foodgrains in the country. 

Recommendations 

On procurement related issues: 

• HLC recommends that FCI hand over all procurement operations of wheat, paddy and rice to states that have gained sufficient experience in this regard and have created reasonable infrastructure for procurement. These states are Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab. FCI will accept only the surplus from these state governments to be moved to deficit states. FCI should move on to help those states where farmers suffer from distress sales at prices much below MSP, and which are dominated by small holdings, like Eastern Uttar Pradesh, Bihar, West Bengal, Assam, etc. 

• This is the belt from where second green revolution is expected, and where FCI needs to be pro-active, mobilizing state and other agencies to provide benefits of MSP and procurement to larger number of farmers, especially small and marginal ones. 

On PDS and NFSA related issues:

•  The coverage of NFSA should be brought down from 67% population to 40%. 

• The targeted beneficiaries must be given 6 months ration in advance, right after the procurement season draws to a close.
  
• Gradual introduction of cash transfers in PDS. 

On stocking and movement related issues: 

• FCI should outsource its stocking operations to various agencies such as Central Warehousing Corporation, State Warehousing Corporation, Private Sector under Private Entrepreneur Guarantee (PEG) scheme.

•  Movement of grains needs to be gradually containerized which will help reduce transit losses, and have faster turn-around-time by having more mechanized facilities at railway sidings. 

On Buffer Stocking Operations and Liquidation Policy: 

• DFPD/FCI have to work in tandem to liquidate stocks in OMSS or in export markets, whenever stocks go beyond the buffer stock norms. 

•  A transparent liquidation policy is the need of hour, which should automatically kick-in when FCI is faced with surplus stocks than buffer norms. Greater flexibility to FCI with business orientation to operate in OMSS and export markets is needed. 

On direct subsidy to farmers: 

• Farmers be given direct cash subsidy (of about Rs 7000/ha) and fertilizer sector can then be deregulated. This would help plug diversion of urea to non-agricultural uses as well as to neighbouring countries, and help raise the efficiency of fertilizer use. 

On end to end computerization: 

• HLC recommends total end to end computerization of the entire food management system, starting from procurement from farmers, to stocking, movement and finally distribution through TPDS. It can be done on real time basis, and some states have done a commendable job on computerizing the procurement operations.

On the new face of FCI: 

• The new face of FCI will be akin to an agency for innovations in Food Management System with a primary focus to create competition in every segment of foodgrain 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 larger number of farmers and consumers.