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With so much expectation from the beginning of a new decade and high hope towards building India, a step ahead in the race of developing nations, we stand transfixed amidst the heartbreaking pandemic, disrupting a normal living. With essentials in demand, an immediate attention is to be focused on administration and maintenance of food and other agri products.

Food Corporation of India (FCI), a statutory body under the Ministry of Consumer Affairs, Food & Public distribution was set up under Food Corporation  Act,1964. Its headquarters initially in Thanjavur (Tamil Nadu) was later shifted to Delhi. FCI is considered to be one of the largest Corporations in India, the largest supply chain management in Asia and second largest supply chain management in the world. However, FCI’s role is limited to the implementation of the decisions made by the Ministry including the fixing up of MSP, import/export rate and quantity. In general, FCI procures rice and wheat(mainly) by paddy purchase, mill levy/custom milling and stores them in warehouses called FCI-depot. The depos have a considerable capacity for food storage and buffer storage along with private equity godowns to implement the modern silo storage. The FCI collaborates with the Public Distribution System(PDS) in their five zones spread across the country, for transportation and distribution for ration card holders.

The FCI, recently, notwithstanding its objectives has gained popularity for all negative reasons. However, after the green revolution, the FCI was self-sufficient in fulfilling the regular in-demand crop (rice and Wheat), managing the procurement and grain stocks for further public distribution through PDS. The 70’s and 80’s saw issues related to poor storage conditions of grains(grains lost to pests, mainly, rats). This organization in the 90’s had reached such heights that the ‘corporation’ in FCI was often prompted as ‘corruption’. Until recently, even with a tarnished reputation, FCI stands successful in maintaining coordination with the PDS, which exists as a lifeline to the vulnerable sections.

The working of FCI are broadly categorized into four objectives based on the Food Corporation Act 1964:

  1. Effective price support operations for safeguarding the interests of the poor farmers.
  2. Distribution of food grains throughout the country for PDS (Public Distribution System)
  3. Maintaining a satisfactory level of operational and buffer stocks of food grains to ensure National Food Security.
  4. Regulate market price to provide for food grains to consumers at a reliable price.

With the ongoing pandemic, FCI can ward off the plight of starvation and hunger of crores of migrant workers, who move across the state borders with either little or nothing to feed while enduring the lathis of the police, cameras of the media, with meagre property on their shoulders and no helping hands. The experts, at the beginning of the lockdown presented statistics of about 77 million tonnes of grains in godowns apart from the new rabi procurement that might hit the godowns with storage issues. This situation arose with the absence of proactive liquidity policy for these new crops. Even with the current opening up of godowns, the problem is only temporarily solved. There is an immediate need to bring the modern storage techniques implemented.

With the lockdown, FCI had moved 3million tonnes of grains to Uttar Pradesh, West Bengal, Bihar, Karnataka and the entire North East Region, by the mid of April. These regions have constantly seen their demand outstripping their procurement either because of  low production or no production of the crop in need. With the extended lockdown and minimal workforce, FCI enabled the states and NGOs to purchase these goods via e-auctions, under the Open Market Sale Scheme(OMSS). With incoming rabi crop during the lockdown, the interstate and inter-region delivery of grains has become faster without the hurdles caused due to traffic and other bottlenecks in railway or by road.

 Considering the fact that FCI is more reliant on rail because of the economical advantages it possesses over other modes. With the statistics from 2019-20 of all the transfers, only 24% were by road. However, movement by road will reach remote areas. Thus , an amendment is to be made by FCI to considerably rely on road transport as well to reach the vulnerable areas that are most in need. With the current scenario,  grains have to be moved faster with least cost and effort. 

With easing lockdown, and movement of population, the second half of the year can be predicted to see an increase in demands of staples from the food-insecure hotspots, the migrant villages and remote areas. An example of a strategy adopted by the US can be considered, called the ‘pre-positioning shipments’. Relating it to our country and its possibilities, India is equipped with 5 regional zones and further subzones, the grains can be stored  either at the headquarters or  in the godowns in  vicinity to the areas that are identified as hotspots or migrant villages or any other remote places  to administer the grain storage. Apart from the reaches of  FCI, the grains can be stored in panchayat warehouses in food insecure/remote areas in small hermetically silos or containers. This will enable the states and organizations to respond rapidly in the crisis prone areas and in turn bring a sense of reassurance and provide psychological comfort to the affected communities. These will provide extra aid to the markets that are severely disrupted or are underserved of the goods.

Apart from the work of transportation and distribution of the supply, measures from higher officials  also matters. Government has to think beyond the PDS and Pradhan Mantri Garib Kalyan Yojana and set a better existing limits of stocks, keeping in consideration its own expense and not burdening the states with more deficits adding to the previous fiscal burdens. Once this idea is implemented, keeping the pre-positioning in mind, the local distributors and the government are automatically equipped with flexible access to grains even at short notice, including the feeding programs, free distribution to all ration card holders and those extending beyond this category. By giving access to local distributors the panchayat or the concerned authority gets freedom to sell  the essential commodities locally at a predetermined price until the supply is fully restored to normalcy.  A couple of states are overwhelmingly gifted with Self-help groups under the National Rural Livelihood  Mission who work as the last mile to aid food, apart from the PDS’s roles. Thus, no new reform is actually a requisite to bring in new committees for catering the need of hour, but the existing committees have to coordinate with the FCI’s working arrangements in each and every state.

The FCI, since its inception, has been following the first in–first out (FIFO) policy for dispatching grains from godowns to the market. In other words, the grains that have been procured first are distributed first to avoid the older stocks left unturned. This statistics of  FIFO is considered both for the time period of  either a year or even half a year. So, another amendment, at this stage is necessary to carter the stock to the nearest location with demands arising due to crisis and enable movement that would cost least time, money and effort. Thus  the Centre and States must  look at all these inefficiencies in grain management system under the National Food Security Act to find the required resources.

The flocking of farmers to the markets to reach consumers directly in the absence of supply chains is seen as mismanagement and it  increases the despair of the  farmer community as a whole. Thus a necessity to rebuild the supply chain should be addressed immediately. FCI collaborates with NAFED for logistics to support the efforts taken by the corporation. NAFED  apart from this support has considerable initiatives for the procurement and transport of horticulture crops. It  in turn will boost the capacity-quality building and ease the burden to single handedly reach out the needy. FCI must also increase  the role of the Farmer Producer  Organisation (FPO) and help them by providing agricultural inputs such as seeds, fertilizers, pesticides, packing materials, transport facilities and proper early-warning and control systems and educate those class on the preventive measures against ongoing locusts and  also arrange for providing them with the required disinfectants and machinery either by subsidy or by waiving the charges .

There are a couple of concerns regarding the agricultural role of the FCI; the long term concern is about costs of food subsidies. An analysis on the subsidies during the period of 2001-16 had seen an average of 60% of the cost acquisition, procurement, distribution and carrying stocks transfers to farmers. Yet, not everything that is being counted as a subsidy represents a waste of recourse, even as the distributional consequences and ineffectiveness have a lot to be desired. The first step to be taken by the government is to find a solution and clear the debts, which estimates to about Rs. 2.55lakh crore until March 2020 in the form of National Small Savings Fund loans. NFSA distributes wheat and rice to 67% of the population at Rs.2/Kg and Rs3/Kg respectively. However, the economic cost at FCI is Rs.25/Kg and Rs.35/kg. This led to a debt of Rs.1.8lakh Crores for the food subsidy above the loans. With piling up of debts, FCI is subjected to more and more borrowing. Therefore, the Ministry along with the FCI officials have to revisit  and set priorities  as per the requirement to avoid further liquidating. More light needs to be thrown by the FCI on issues that they face on the ground , for the government to provide the best of the resolutions. Second, the extended food distribution of subsidised grains, to a certain percentage, are subjected to dumping and depressing food prices locally, which affects farmers. The solution to this problem needs to be addressed immediately but it might take a little longer for the results to show up.

In the future, with a hope of  gradual declining threats of pandemic, questions about FCI and  its objectives might surface. The Shanta Kumar Report of 2015, recommended that FCI must be repurposed, its objectives to be re-written in accordance with its relevance to this technology driven agricultural sector with close collaboration with supply chain in an innovative way. Repurposing the organisation as ‘Agency for Innovation in Food Management Systems’ and Shanta Kumar advocated shedding its role as a procurement and distribution agency. Concentration on three points that need reiteration; first, the poor under the Antyodaya Scheme should keep getting the maximum food subsidy, while others can buy at a fixed issue rate. Second, the limit subsidises grain distribution under NFSA to constrain to 40% and not 67%. Third, limit the procurement of rice particularly in the north-western states of Punjab and Haryana where the groundwater table is depleting fast and encourage public sector participation in grain management.Thus, an urgent need of modernising storage is a genuine need, as well as a need of a body like FCI or a public stockholding, that had never been a large matter of concern, is strongly established like never before, as the world learns to live in a new normal in the post-pandemic age.

By – Neha Prakash


Colonel M.M Nehru

Col. MM Nehru, Director at NFA, is a Personality Developer. He is an experienced trainer and has orchestrated numerous sessions around leadership, time management and personal effectiveness for corporate clientele. He holds a master’s degree (PGDM) in Defence Studies and Business Administration and was an Arts Graduate. If you want to know more about Colonel Nehru Click Here

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