Challenge for FCI of India

In News: At the projected economic cost of Rs 29.94/kg for wheat and Rs 42.94/kg for rice, the corresponding per-kg PDS consumer subsidy in the coming fiscal would work out to Rs 27.94 and Rs 39.94, respectively.

• Thus FCI is facing three-pronged challenges of Rising stocks, Increasing cost & Push to procure.

Challenges to FCI:

• Increased Economic Cost: The economic cost is what the FCI incurs in procuring, transporting, storing, and distributing every kg of wheat or rice.
  • The estimated economic cost includes
    • “pooled cost” (roughly what the farmer gets).
    • “procurement incidentals” (gunny bags, market fee, arhtiya commission, labor, and other mandi-level expenses)
    • “distribution cost” (freight, handling, storage, interest and other administrative charges)
  • The economic cost of wheat sold through the public distribution system (PDS) is budgeted to go up to Rs 29.94 per kg and that of rice to Rs 42.94 per kg in 2021-22, from their corresponding current levels of Rs 27.40 and Rs 39.99 per kg.

• • The rise in economic cost may seem small but as 81.35 crore (67% of India’s Population) persons available the 5kg of wheat or Rice per month at Rs 2 and Rs. 3 per kg, it becomes significant.
• Rising Stocks:
  • It increases the need for warehouse facility and storage cost.
  • In reply to an RTI in 2020, the Ministry of Consumer Affairs, Food and Public Distribution revealed that more than 38,000 metric tonnes (MTs) of food grains were damaged since the last five years.

                                                                                  Source: IE

• Push to Procure
  • Despite the NFSA was modified to release extra grains in market to feed returning migrants in view of COVID, the stock holdings of FCI has increased
  • The prime reason behind increasing stockholdings is the government’s push to procure.
  • The political pressure due to Farmers’ Protest has worsened the situation.
  • Further the government, since the last few years, have not paid the full difference between Procurement and Central Issue Price which has led to a massive pile of Debt Burden.

Way Ahead

• Economic Survey 2020-21 suggested revision of prices to reduce the Food Subsidy Burden.
  • The current price of Rs 2 and Rs 3 per kg was fixed in 2013 for 3 years but has not been increased till now.
  • Central Issue Price should be raised.
• Implementation of recommendations of the High Level Committee, 2015 under Shanta Kumar.

FCI can play a pivotal role in ensuring the food and nutritional security of India. But for that it needs greater autonomy and streamlined supply chain. Further the alternate Direct Benefit Transfer or Food Coupon Scheme can also be explored on pilot basis.

Source: IE