• The Food Corporation of India (FCI) is a statutory body and Public Sector Undertaking (PSU) under the Ministry of Consumer Affairs, Food and Public Distribution.
  • It was set up in 1965 following the enactment of the Food Corporation Act, 1964 with the objective of fulfilling various aspects of the National Food Policy at the time.
    • Simultaneously, Commission for Agricultural Costs and Prices (CACP) was created in 1965 to recommend remunerative prices to farmers.
Commission for Agricultural Costs and Prices (CACP)
  • The Commission for Agricultural Costs & Prices (CACP) is an attached office of the Ministry of Agriculture and Farmers Welfare, Government of India.
  • The Commission comprises a Chairman, Member Secretary, one Member (Official), and two Members (Non-Official).
    • The non-official members are representatives of the farming community and usually have an active association with the farming community.
  • Functions of CACP:
    • It is mandated to recommend minimum support prices (MSPs) to incentivize the cultivators to adopt modern technology and raise productivity and overall grain production in line with the emerging demand patterns in the country.
    • MSP for major agricultural products is fixed by the government, each year, after taking into account the recommendations of the Commission.
    • As of now, CACP recommends MSPs of 23 commodities, which comprise 7 kinds of cereal (paddy, wheat, maize, sorghum, pearl millet, barley, and ragi), 5 pulses (gram, tur, moong, urad, lentil), 7 oilseeds (groundnut, rapeseed-mustard, soybean, sesamum, sunflower, safflower, nigerseed), and 4 commercial crops (copra, sugarcane, cotton and raw jute).
  • CACP submits its recommendations to the government in the form of Price Policy Reports every year, separately for five groups of commodities namely:
    • Kharif crops
    • Rabi crops
    • Sugarcane
    • Raw Jute
    • Copra
  • Before preparing the aforesaid five pricing policy reports, the Commission draws a comprehensive questionnaire and sends it to all the state governments and concerned National organizations and Ministries to seek their views.
  • Separate meetings are also held with farmers from different states, state governments, and National organizations like Food Corporation of India (FCI), NAFED, Cotton Corporation of India (CCI), Jute Corporation of India (JCI), trader’s organizations, processing organizations, and key central Ministries.
  • The Commission also makes visits to states for on-the-spot assessment of the various constraints that farmers face in marketing their products or even raising the productivity levels of their crops.
  • Based on all these inputs, the Commission then finalizes its recommendations/reports, which are then submitted to the government.
  • The government, in turn, circulates the CACP reports to state governments and concerned central Ministries for their comments.
  • After receiving the feedback from them, the Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by the CACP.
  • Once this decision is taken, CACP puts all its reports on the website for various stakeholders to see the rationale behind CACP’s price and non-price recommendations.

Organizational Structure of FCI

  • The Food Corporation of India is led by a Chairman with Headquarters at New Delhi and it operates through its many depots located across the country. The depot reports to a divisional office, which is headed by an Assistant General Manager.
  • These managers are in charge of various sections such as sales, contracts, procurement, quality control, operations account,
  • The Divisional Officer reports to the Regional Office. A General Manager is in charge of the Regional Office and they are usually selected from the ranks of the Indian Administration Services, Indian Police Services or from the All India Services under deputation.
  • The officers inform the General Manager on the status of their respective sections.
  • The FCI is divided into the following 5 zones:
    • North
    • South
    • East
    • West
    • North-East
  • They all have their own zonal offices. Under the Zonal offices are the regional offices which are headed by an Executive Director usually selected from the Indian Administrative Service or Indian Revenue Service.
Food Corporation of India

Objectives of FCI

  • The Objectives of the Food Corporation of India is as follows:
    • Proper price support for to protect the interests of poor farmers
    • To help in transforming the crisis management oriented food security into a stable security system to ensure availability, accessibility and affordability of food grains to all people at all times so that no one, nowhere and at no time should go hungry.
    • Maintenance of operational and buffer stocks of food grains to ensure continued supply of essential food supply.
    • Effective distribution of foodgrains through a Public Distribution Systems (PDS)
    • Regulation of market price for foodgrains so that the population can get them at an affordable price.

Major Activities Undertaken by FCI

  • Procurement
    • The Central Government extends price support for procurement of wheat, paddy and coarse grains through the FCI and State Agencies. All the food grains conforming to the prescribed specifications are procured by the public procurement agencies at the Minimum Support Price (MSP) plus incentive bonus announced, if any.
    • Procurement is undertaken both in direct and in-direct mode.
      • Under Decentralized Procurement Scheme (DCP), introduced in 1997-98, food grains are procured and distributed by the State Governments themselves. The designated States procure, store and issue food grains under Targeted Public Distribution System (TPDS) and other welfare schemes of the Government.
      • The decentralized system of procurement was introduced to enhance the efficiency of procurement for PDS and to encourage procurement in non-traditional States as well as to save on transit losses and costs.
    • Before the start of each procurement season, Central Government announces uniform specification for quality of wheat, paddy, rice and coarse grains.
      • Quality Control Division of FCI ensures procurement of food grains from procurement centres strictly in accordance with Govt. of India’s uniform quality specifications.
    • FCI has also been nominated as an additional nodal Agency for procurement of Pulses and Oilseeds.
  • Increase in FCI-owned Storage Capacity:
    • FCI is also required to hold huge volumes of procured food grains for a sustained period of time, both for the planned delivery through PDS as well as for any unforeseen situations. Therefore, Storage function of FCI is very important.
    • To meet the storage obligation, FCI has an extensive network of storage depots and silos in strategic locations across the country.
  • Movement & distribution of the stock to deficit regions:
    • FCI undertakes movement for the following purposes:
      • To evacuate food grain stocks from the surplus regions.
      • Supply them to deficit regions for distribution through PDS and other schemes.
      • To create buffer stocks in deficit region.
    • FCI also undertakes the supply of food grains for:
      • Defence and Paramilitary forces
      • Natural Calamities
  • Distribution
    • FCI meets the requirements of TPDS through grains procured which are issued at Central Issue Price fixed by Government to fulfill the objective of helping the economically vulnerable sections of society.
    • FCI delivers food grains to State Govt./ State Agencies from its base depots for distribution by the latter through Fair Price Shops.
    • The role of FCI becomes even more important in the backdrop of National Food Security Act, 2013, that commits to distribute grains through TPDS and other welfare schemes, at highly subsidized prices.
    • Targeted Public Distribution System
      • The Targeted Public Distribution System (TPDS) was launched in 1997 to benefit the poor and to keep the budgetary food subsidies under control to the desired extent following failure of the earlier PDS system.
      • Conceptually, the transition from universal PDS to TPDS was a move in the right direction, as it was designed to include all the poor households and raise the unit subsidy and ration quota considerably for them.
      • TPDS aims at providing food grains to people below the poverty line at highly subsidised prices from the PDS and food grains to people above the poverty line at much higher prices than the poverty line.
      • Thus, the TPDS adopted by the Government of India maintains the universal character of the PDS but adds a special focus on the people below the poverty line.
      • The National Food Security Act, 2013 (NFSA) has been notified which provides for all India coverage of upto 75% of the rural population and up to 50% of the urban population of the country for receiving highly subsidized foodgrains.
  • Public Distribution System
    • Public distribution of essential commodities was in existence in India during the inter-war period. However, PDS, with its focus on distribution of food grains in urban scarcity areas, had emanated from the critical food shortages of 1960s.
    • PDS had substantially contributed to the containment of rise in food grain prices and ensured access of food to urban consumers. As the national agricultural production had grown in the aftermath of the Green Revolution, the outreach of PDS was extended to tribal blocks and areas of high incidence of poverty in the 1970s and 1980s.
    • PDS is supplemental in nature and is not intended to make available the entire requirement of any of the commodities distributed under it to a household or a section of the society.
    • PDS is operated under the joint responsibility of the Central and the State Governments. The Central Government, through FCI, has assumed the responsibility for procurement, storage, transportation and bulk allocation of food grains to the State Governments.
    • The operational responsibilities including allocation within the State, identification of eligible families, issue of Ration Cards and supervision of the functioning of Fair Price Shops etc., rest with the State Governments.
    • Under the PDS, presently the commodities namely wheat, rice, sugar and kerosene are being allocated to the States/UTs for distribution. Some States/UTs also distribute additional items of mass consumption through the PDS outlets such as pulses, edible oils, iodized salt, spices, etc.
  • Revamped Public Distribution System
    • The Revamped Public Distribution System (RPDS) was launched in June, 1992 with a view to strengthen and streamline the PDS as well as to improve its reach in the far-flung, hilly, remote and inaccessible areas where a substantial section of the poor live.
    • It covered 1775 blocks wherein area specific programmes such as the Drought Prone Area Programme (DPAP), Integrated Tribal Development Projects (ITDP), Desert Development Programme (DDP) were being implemented and in certain Designated Hill Areas (DHA) which were identified in consultation with State Governments for special focus.

Reforms in Food Corporation of India

  1. Shanta Kumar Committee recommendations suggest designating the FCI as an “Agency for Innovation in Food Management Systems.”
    • At the procurement stage, the recommendations include outsourcing procurement in better-performing states like Punjab but centralizing procurement in states like Bihar, Assam, Bengal, and eastern Uttar Pradesh, cash transfers to farmers, setting buffer stock quotas instead of open-ended procurement, and stringent quality checks by third parties.
    • At the storage stage, the recommendations include outsourcing stocking operations to various agencies such as the Central Warehousing Corporation (CWC), State Warehousing Corporation (SWC), and the private sector under the Private Entrepreneur Guarantee (PEG) scheme, automatic liquidation of excess buffer stock in the open market, and maintaining strategic buffer reserves.
    • At the distribution stage, the recommendations include covering 40% of the population under the National Food Security Act 2013, which will result in less subsidy but more quantity, end-to-end computerization, and online tracking of the entire system from procurement to retail distribution.
  2. The recommendations also include transportation improvements such as integrating road transport along with rail (currently there is very high dependence on rail), using containers instead of gunny bags, utilizing inland waterways, and automation in loading and unloading.
  3. The pre-positioning shipment policy is recommended for chronically starved areas, where food grains can be stored nearer to the target population.
  4. Doing away with the FIFO (first in, first out) principle is recommended to release hygienic food grains on time.
  5. The recommendations suggest leveraging a network of Self-Help Groups (SHGs) and Farmer Producer Organizations (FPOs) to ensure last-mile connectivity and distribution.

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