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

FCI to the rescue


From UPSC perspective, the following things are important :

Prelims level: FCI.

Mains level: Paper 3- Role of the FCI.

FCI, indeed, has remained a crucial topic from the examination viewpoint. Mostly it is highlighted for its issues, corruption and wastages in the godowns. Be it MS Swaminathan or the latest Shanta Kumar committee all focus on how to revamp this giant institution. This article, however, points to the relevance of the FCI in the times of pandemic and suggests areas where there is scope for improvement in fulfilling its role. Stay tuned to find out what are the major concerns with FCI which needs consideration by the government.

A background check on FCI

  • The FCI was set up under the Food Corporations Act 1964.

  •  In its first decade, FCI was at the forefront of India’s quest of self-sufficiency in rice and wheat following the Green Revolution.

  • Its functions involved managing procurement and stocking grain that supported a vast Public Distribution System (PDS).

  • Over time it became a behemoth that had long outlived its purpose and 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.

What role can FCI play amid Covid-19?

  • The FCI has consistently maintained the PDS, a lifeline for vulnerable millions across the country.

  • In the middle of the COVID-19 pandemic, it can play a major role in avoiding hunger and starvation.

  • Before the lockdown, with 77 million tonnes of grains in its godowns, the FCI was facing a serious storage problem.

  • This was worrying not just because of a shortage of modern storage facilities but also because the FCI lacked a “pro-active liquidation policy” for excess stocks.

  • Post-COVID: FCI has opened up the godowns to release food stocks to those affected by the lockdown.

  • 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 underway 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 of transport.

5 suggestions for the FCI to perform better

1. Using roads along with rails:

  • 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 long recognised that road movement is often better suited for emergencies and for remote areas.

  • Containerised movement too, which is not the dominant way of transporting grain, is more cost-effective and efficient.

  • Now, more than ever, it is imperative to move grain quickly and with the least cost and effort, to areas where the need is greatest.

2. Store grain near demand hotspot

  • The FCI already has a decentralised network of godowns.

  • In the current context, 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.

  • This would allow State governments to respond rapidly.

  •  It will also provide a sense of assurance and psychological comfort to vulnerable communities.

  • This is especially relevant for regions that are chronically underserved by markets or where markets have been severely disrupted.

3. Release stocks over and above existing allocation

  • The central government need to look beyond the PDS and the Pradhan Mantri Garib Kalyan Yojana and release stocks over and above existing allocations.

  • This would provide flexibility to local governments to access grains for appropriate interventions at short notice and to sell grain locally at pre-specified prices until supply is restored.

  • This would allow the state government to engage in feeding programmes, free distribution to vulnerable and marginalised sections, those who are excluded from the PDS, etc.

  • In many States, there is a vibrant network of self-help groups formed under the National Rural Livelihoods Mission (NRLM) which can be tasked with last mile distribution of food aid other than the PDS.

  • Consultative committees presumably exist already in each State to coordinate with the FCI on such arrangements.

4. Suspend FIFO principle

  • Typically, the FCI’s guidelines follow a first in, first out principle (FIFO).

  • FIFO 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 suspend this strategy, that enables movement that costs least time, money and effort.

5. Support the farmers trying to reach out to consumers directly

  • In many places, farmer producer organisations (FPOs) have been at the forefront of rebuilding these broken supply chains.

  • The FCI along with the National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED), is well placed to rope in expertise to manage the logistics to support these efforts.

  • NAFED has already taken the initiative to procure and transport 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.

Major concerns regarding FCI’s role

  • Cost of food subsidy: The first is a long-term concern regarding the costs of food subsidy.

  • An analysis of FCI costs spanning 2001-16 suggests that on average about 60% of the costs of acquisition, procurement, distribution and carrying stocks are in fact transfers to farmers.

  • Not all of what is counted as subsidy therefore represents a waste of resources.

  • 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.

  • Depressing food prices: A second concern is that extended food distribution of subsidised grain is akin to dumping and depresses food prices locally.

  • The depressed prices, in turn, affect farmers.

The Covid-19 pandemic has brought into sharp focus the relevance of the FCI. This makes PDS and Food security in prelims as well as in mains examination focus area. So, questions based on the topic are likely to be asked by the UPSC, for ex- “The FCI’s role in providing succour has been proved many times in the past and it lived up to its reputation amid Covid-19 pandemic as well. In the light of the above statement, discuss the relevance of the FCI and suggest the ways to improve its performance in the times of disasters”

Also consider a question asked by the UPSC in 2019, “What are the reformative steps taken by the Government to make the food grain distribution system more effective?”


In 2015, 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. There is no doubt that the FCI needs to overhaul its operations and modernise its storage. 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.

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