Why Does FCI Recurrently Fight Grain Glut?

FCI Grain

As lockdown gives FCI, India’s central agency, a new reason to face rotting stock, a look into the reasons and ways to resolve the issue.

India witnessed a cruel irony this summer when a national lockdown left the poor all the more deprived of a decent meal a day, while the country’s huge stock of foodgrains perished owing to bottlenecks in their distribution.

No less than 1,550 tonnes of wheat and rice got damaged in the godowns of Food Corporation of India (FCI) during the four months from May, going by official records known this week. In fact, June alone recorded the rotting of 1,453 tonnes of grains, as per the data provided by the Union Ministry of Consumer Affairs. The corresponding figures for May were 26 tonnes, while it was 41 tonnes and 51 tonnes respectively for July and August.

This, when there was absolutely no damage to foodgrains this March and April. The final week of March and the whole of April were when the country stood virtually still amid extreme restrictions on human movements (pertinently, surface transportation) imposed by the government with a view to containing the spread of Covid-19.

That means the rising piles of foodgrains in FCI godowns do not necessarily indicate a relationship with the pandemic-induced crisis across the sectors in the economy or strata of society. Admittedly, a glut of food remaining idle and eventually becoming unusable is not a new phenomenon. It is a recurring issue that India is increasingly finding tough to solve despite devising several counter-measures — more so in the 21st century.

Core functions

A look at FCI’s profile and duties:

As a government-run body headquartered now in Delhi, FCI was set up in 1965—the year India initiated the Green Revolution that sought to industrialise agriculture by adopting modern technology and methods featuring high-yielding variety seeds, tractors, irrigation facilities, pesticides and fertilizers. FCI, with regional centres across states, has a chairperson as head of the statutory organisation. Working under the Ministry of Consumer Affairs, Food and Public Distribution, it primarily seeks to fulfil the prime objectives of the country’s Food Policy that aim at averting crises in food security and stabilise the system.

The motto includes:

  • Effective price support operations to safeguard the farmers’ interests
  • Distributing food grains countrywide through the public distribution system
  • Maintain a good level of buffer stocks
  • Regulate market price in a way that guarantees foodgrains to consumers at a reliable price

FCI, which is most likely Asia’s largest supply-chain management, has five zonal offices and 24 regional offices. Typically, FCI purchases close to one-fifth of the country’s wheat output and one-seventh of its rice output. The purchases are made from the farmers at the rates declared by the Government of India. FCI imposes no limit on the volume of this procurement, carried out at MSP (minimum support price).

The procurement, which FCI carries out in consultation with the state administrations and agencies, works around a large number of purchase centres at various markets and key points. The numbers of which vary according to government decisions. For 2019-20, FCI procured wheat from 21,869 centres and paddy from 64,515. Khanna mandi in upcountry Punjab is the continent’s largest grain market (51 acres), functioning since 1967.

Why the glut?

Quite a few factors line up to the glut in FCI godowns. When more than one of them work simultaneously, the problem aggravates.

  • Bumper production: A bountiful harvest can as well be a matter of concern: the government (FCI) will be under pressure to store the extra quantities. The country’s foodgrain production has been abundant for the past three decades. As for 2019-20, estimates spoke of an all-time high foodgrain output of 295.67 million tonne, which is 10.46 MT more than last year’s. In such a situation, even the ‘normal’ amount of procurement would mean excessive.
  • Legal commitment: The 2013 National Food Security Act (NFSA) that aims to provide subsidized foodgrains to two-thirds of the country’s people has led to increased procurement of wheat and rice.
  • Poor infra: Not only are storage capacities in FCI insufficient, below-par facilities plague several APMC markets set up by states to guard farmers against exploitation by large retailers.
  • Labour strikes: Workers’ agitation, which breaks out at times, hampers prompt transport of foodgrains to and from FCI godowns, leading to their rot.
  • Parallel import: The government, allegedly bowing to pressure from industry lobbies, decides to import food grains when, on the other hand, FCI is struggling to move out its stock of rice and wheat.
  • Supply-chain blocks: A string of transport restrictions in the wake of the pandemic has clogged the PDS channels.
  • Open method: The custom of storing food grains in the open makes the cereals vulnerable to fungus and moisture, during a long wait for transportation.
Possible solutions

Here are some experts-prescribed solutions, besides improving the storage facilities (that would also help end the open method), promptly resolving labour issues and oiling supply-chain routes.

  • Wind up FCI’s procurement in some of the traditional states
  • Divide FCI into two PSUs: National Grain Procurement Corporation and Logistics and Distribution Corporation of India, giving both an extensive engagement of the private sector
  • Ensure prompt export of foodgrains
  • Hand over FCI’s storage capacities to the Central Warehousing Corporation or work on a lease basis involving credible private-sector providers on a competitive basis
  • Reduce the coverage of the NFSA from 67% to 40% 
  • Hand over all procurement operations of foodgrains to states with having sufficient experience and reasonable infrastructure
  • Accept only the surplus (after deducting the needs of the states under NFSA) from these states to be moved to deficit ones like Uttar Pradesh (eastern belt), Bihar, West Bengal and Assam
  • Outsource stocking operations to various agencies such as CWC, State Warehousing Corporation and the private sector under Private Entrepreneur Guarantee (PEG) scheme
  • Task the vibrant network of self-help groups formed under the National Rural Livelihoods Mission with the last-mile distribution of food aid other than the PDS
  • Raise the issue price of PDS grains to 50% of MSP for all except for the households under the poorest (Antyodaya) category
  • Shift to a cash transfer-based food security programme
  • Abolish input subsidies by introducing direct-income support

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