Starving a dinosaur

Don't unbundle Food Corporation, prune it

The setting up of a high-level committee to suggest ways to restructure or unbundle the Food Corporation of India (FCI) needs to be viewed as an opportunity to mend the way the country's food economy is being managed - or, in fact, mismanaged. The food sector needs wide-ranging reforms; just redesigning the management structure won't suffice. The ruling Bharatiya Janata Party, or the BJP, had promised merely to divide the FCI into three separate entities in charge of buying, storing and selling foodgrain. It would be a mistake for the committee to feel bound by this promise. Reform must go further. Indeed splitting the FCI may create more problems than it aims to resolve. For one, it will tend to increase, rather than prune, the food bureaucracy. It does not guarantee an improvement in efficiency or reduction in cost. Coordinating the three core operations will become tougher. And, finally, the ingrained deficiencies of the current system will likely be carried forward to the new entities.

A far more sensible option is to reduce the FCI's size, and to stop the excessive procurement and stocking of foodgrain. Currently, grain purchases at the minimum support price (MSP) are not synchronised with the requirements of the public distribution system (PDS) or with food security needs. If only as much foodgrain is bought as is needed, then there will be significant savings - including in storage costs. Preserving 100,000 tonnes of wheat costs around Rs 150 crore; of rice, Rs 200 crore. Yet the central grain pool managed by the FCI normally carries inventories two to three times higher than the buffer-stocking norms. Even now, the total stockholding is said to be around twice the requirement of the PDS and food security.

All the three main tasks of the FCI can, in fact, be wholly or partly outsourced to state governments or other existing central and state agencies. Most grain purchases for the central pool are already made by state-level agencies. The PDS, too, is the state governments' responsibility, the Centre's role being limited to making the foodgrain available to them at specified spots. In the case of storage, most of the Centre's foodgrain is stored in warehouses hired from the Central Warehousing Corporation (CWC), state warehousing corporations or private parties. So why not transfer the FCI's warehouses to the CWC and let that agency handle storage? In any case, many states are now self-sufficient in foodgrain production and buy enough to meet their PDS needs. Some have, in recent years, reformed and improved their PDS delivery. If the other states follow suit, many of the ills that make the PDS inefficient can be taken care of. Thus, by devolving more responsibilities to the states, the FCI - a dinosaur left over from a past, over-centralised era - can safely be reduced to a small professionally run central food-management body that does little other than set need-based procurement targets and coordinate overall procurement, storage and distribution operations.