Govt considering various options to revamp FCI, not just unbundling

Officials say the food ministry is not keen on breaking up FCI into three separate entities

As the government looks to revamp the functioning of Food Corporation of India (FCI), the food ministry of considering various options to restructure the Corporation and not just limit itself to unbundling.

Officials said the food ministry itself, is not that keen on breaking up the Food Corporation into three separate entities handling procurement, distribution, and storage of foodgrains. The argument given by it is that FCI's share in overall procurement is already low and dividing it into three separate units won't do a world of good.

Among the options being considered by the food department is breaking up the FCI zone-wise. However, this might not be easy. "In this option, there could be some problem of coordination as in India, food grains production and consumption centres are miles apart and arranging logistics for them such as railway rakes could become difficult in the absence of a centralised agency," said a senior food ministry official who is directly involved in the matter.

The other option being mulled is to unburden the FCI of the tasks of procurement of food grains by letting state governments handle the same. This would mean limiting the FCI's task to storage and distribution of food grains.

According to the official quoted above, this option looks slightly feasible because already, the Corporation's share in total procurement is minuscule and handing it over to the states will not make much of a difference. The FCI's overall share in procurement of wheat is merely 12-14 per cent and one to three per cent in the case of paddy. The rest is purchased by state agencies on behalf of the Corporation.

"If you look at it, we have gradually started the process of limiting our food grain procurement and not adopting the absolutely open-ended purchase system," the official said, adding that a final decision was yet to be taken.

"We are considering various options, solutions to revamp the FCI and have also invited suggestions from other stakeholders," said another official. He added the government has accorded top priority to the matter and a decision could be expected this financial year itself.

The FCI was set up under the Food Corporation Act 1964 to fulfil the objectives of the food policy. These included effective price support operations for safeguarding interests of farmers, distribution of food grains throughout the country for public distribution system, and maintaining a satisfactory level of operational and buffer stocks of food grains to ensure national food security.

Prime Minister Narendra Modi has long been advocating unbundling of the Food Corporation to control food prices and lower the administrative cost of handling millions of tonnes of grains every year.

"Just unbundling the FCI won't solve all problems. For example, if in unbundling of the FCI, the entire responsibility of storage is handed over to Central Warehousing Corporation, it needs to be seen whether this leads to lowering of wastage. Or else, there is no point in unbundling the FCI," said Ramesh Chand, director, National Centre for Agriculture Economics and Policy Research.

Finance Minister Arun Jaitley, in his maiden Budget speech, had accorded top priority to restructuring of FCI. "The government is committed to reforms in the food sector. Restructuring the FCI, reducing transportation and distribution losses..." Jaitley had said.