Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

FCI Capital raised from Rs 10,000 cr to Rs 21,000 cr


From UPSC perspective, the following things are important :

Prelims level: Food Corporation of India (FCI): Major functions

Mains level: Read the attached story


  • The government has raised the authorized capital of the state-run Food Corporation of India (FCI) from ₹10,000 crore to ₹21,000 crore, marking a significant stride in bolstering its operational capabilities.
  • This initiative, announced by the Food Ministry, underscores the government’s commitment to strengthening FCI’s role in ensuring food security and safeguarding farmers’ interests.

About Food Corporation of India (FCI)

  • Establishment and Objectives: Founded in 1965 under the Food Corporation Act, 1964, FCI serves as a statutory body under the Ministry of Consumer Affairs, Food and Public Distribution, Government of India.
  • Core Objectives: FCI is entrusted with the tasks of providing price support to farmers by
  1. Procuring grains at Minimum Support Prices (MSP),
  2. Supplying grains to Public Distribution System (PDS), and
  3. Maintaining strategic grain reserves.

Initiatives to Enhance FCI’s Efficiency

  • Integrated IT Systems: FCI is implementing integrated IT solutions and adopting e-office initiatives to transition towards a paperless work environment and streamline operational functions effectively.
  • Infrastructure Development: FCI is investing in infrastructure projects such as cement road construction, roof maintenance, and weighbridge modernization to enhance operational efficiency.
  • Quality Assurance: Efforts are underway to procure lab equipment and develop software platforms for quality assessment, ensuring adherence to stringent quality standards.

Significance of Increased Authorized Capital

  • Operational Strengthening: The augmentation of authorized capital aims to bolster FCI’s operational efficiency, reduce interest burdens, and positively impact government subsidies.
  • Modernization Imperative: In addition to financial infusion, the government emphasizes the modernization of storage facilities, transportation networks, and adoption of advanced technologies for enhanced performance.
  • Empowering Farmers: The government’s commitment to MSP-based procurement and investment in FCI’s operational capabilities reflects a collaborative approach towards empowering farmers, fortifying the agricultural sector, and ensuring nationwide food security.

Relevance of FCI

  • Bedrock of National Food Security: FCI plays a pivotal role in implementing the National Food Security Act, ensuring procurement and distribution to far-flung areas for national food security.
  • Response to Crisis: During crises such as the Covid pandemic and migrant crises, FCI has effectively tackled challenges of hunger and starvation.
  • Fight against Malnutrition and Poverty: FCI’s role in the Public Distribution System (PDS) contributes to combating malnutrition and poverty, promoting inclusive growth.
  • Support to Farmers: By purchasing crops at MSP, FCI provides financial security to farmers, making agriculture remunerative.

Challenges Faced by FCI

  • Limited Farmer Participation: Less than 10% of farmers can sell their produce to government agencies due to various factors such as lack of awareness or access to the MSP system, benefiting only large farmers in certain states like Punjab.
  • Storage Overload: FCI has stored double the grains than the prescribed buffer limits, leading to a shortage in the open market, inflation, and deterioration of grains due to limited storage capacity.
  • Leakages in Distribution: According to NSSO 2011, 40-60% of grains distributed through the Public Distribution System (PDS) are siphoned off, highlighting significant challenges in distribution efficiency and governance.

Way Forward:

Shanta Kumar Committee (2014) Recommendations

  • The Shanta Kumar Committee proposed a comprehensive set of recommendations aimed at reforming the Food Corporation of India (FCI) and enhancing its efficiency in managing food systems.
  • The committee proposes designating FCI as an “Agency for Innovation in Food Management Systems” to foster creativity and efficiency in managing food resources.

[A] Procurement Stage

  • Outsourcing Procurement: Recommends outsourcing procurement activities in better-performing states like Punjab while centralizing procurement in states like Bihar, Assam, Bengal, and eastern Uttar Pradesh.
  • Cash Transfers to Farmers: Suggests exploring cash transfers to farmers as an alternative mechanism for procurement.
  • Buffer Stock Quotas: Advocates setting buffer stock quotas instead of open-ended procurement to optimize resource utilization.
  • Stringent Quality Checks: Emphasizes the need for stringent quality checks by third parties to ensure the quality of procured grains.

[B] Storage Stage

  • Outsourcing Stocking Operations: Recommends 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 Stock: Proposes automatic liquidation of excess buffer stock in the open market to prevent overstocking and market distortions.
  • Maintaining Strategic Buffer Reserves: Suggests maintaining strategic buffer reserves to stabilize markets and address emergencies effectively.

[C] Distribution Stage

  • Expanding Coverage under NFSA: Recommends expanding coverage under the National Food Security Act 2013 to encompass 40% of the population, ensuring wider access to subsidized food grains.
  • End-to-End Computerization: Advocates for end-to-end computerization of the distribution system to enhance transparency, efficiency, and accountability.
  • Online Tracking: Proposes online tracking of the entire system from procurement to retail distribution to facilitate real-time monitoring and management.

[D] Transportation Improvements

  • Integration of Road and Rail Transport: Suggests integrating road transport along with rail to optimize transportation networks and reduce dependency on rail.
  • Containerization: Recommends using containers instead of gunny bags for efficient and hygienic transportation of food grains.
  • Utilization of Inland Waterways: Advocates utilizing inland waterways for transporting food grains, leveraging cost-effective and eco-friendly transportation modes.
  • Automation in Loading and Unloading: Proposes automation in loading and unloading processes to enhance efficiency and minimize manual labor.

[E] Operational Overhaul

  • Doing Away with FIFO Principle: Suggests doing away with the FIFO (first in, first out) principle to release hygienic food grains on time and prevent wastage.
  • Targeting Chronically Starved Areas: Recommends implementing a pre-positioning shipment policy to store food grains nearer to chronically starved areas, ensuring timely access to essential supplies during emergencies.
  • Ensuring Last-Mile Connectivity: Advocates leveraging a network of Self-Help Groups (SHGs) and Farmer Producer Organizations (FPOs) to ensure last-mile connectivity and efficient distribution of food grains.

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