A grain stockist with a role still relevant 

#GS3 #Hunger&Starvation #PSD  

In the middle of the pandemic, the FCI holds the key to warding off a looming crisis of hunger and starvation 

  • For several years now, the Food Corporation of India (FCI) has drawn attention for all the wrong reasons. Set up under the Food Corporations Act 1964, in its first decade, the FCI was at the forefront of India’s quest of self-sufficiency in rice and wheat following the Green Revolution, managing procurement and stocking grain that supported a vast Public Distribution System (PDS).  
  • Over time, however, many began to see it as a behemoth that had long outlived its purpose.   
  • Its operations were regarded as expensive and inefficient, a perception that has come to be accepted as fact.   
  • 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, prompting a former chairman to declare that there was a problem with “human rats” as well.   

Why it is better placed 

  • Today, in the middle of the COVID-19 pandemic, it holds the key to warding off a looming crisis of hunger and starvation, especially in regions where lakhs of migrant workers have returned with little in hand by way of money or food.   
  • Before the lockdown, many experts had observed that with 77 million tonnes of grains in its godowns and on the eve of a new round of procurement — of a bumper harvest of wheat — 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.   
  • 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 under way in many States, it seems that the country will secure ample food supplies to cope with the current crisis.   
  • First, 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.   

Positioning strategy 

  • Second, given that the coming months will see predictable demand of staples from food insecure hotspots where migrant workers have just returned or where work is scarce, one strategy that has been adopted widely in international food aid by the United States, for example, is “pre-positioning” shipments, where grain is stored closer to demand hotspots.   
  • 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, in small hermetic silos or containers; this would allow State governments to respond rapidly, not to mention the sense of assurance and psychological comfort that it will offer vulnerable communities.   
  • Third, there is a strong case for the central government to look beyond the PDS and the Pradhan Mantri Garib Kalyan Yojana and release stocks over and above existing allocations, but at its own expenses rather than by transferring the fiscal burden to States.   
  • Fourth, typically, the FCI’s guidelines follow a first in, first out principle (FIFO) that 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.   
  • Fifth, today farmers across the country growing for markets are seeking to reach out to consumers directly, many out of sheer despair.   
  • 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 — and revisit its current preference for not liquidating these in order to contain the Union government’s fiscal deficit.   
  • A second concern is that extended food distribution of subsidised grain is akin to dumping and depresses food prices locally, in turn affecting farmers.   
  • 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, even as we contemplate its new role in a post-pandemic world.  
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