Implement panel report on FCI

The Shanta Kumar committee’s report on restructuring of the Food Corporation of India (FCI) deserves careful and favourable consideration, as the official agency is in crying need for reform. Its role in the country’s agricultural procurement, storage and distribution system is crucial but it has failed to play that role in the best interests of farmers and consumers. It is known for inefficiency, wastage and corruption and many other ills and problems which have badly affected the country’s agricultural and the larger economy. About 47 per cent of the grains in the public distribution system (PDS), of which the FCI is the pillar, is lost as leakage, and a large amount of stored grains are lost to rain, rats and pilferage. Its procurement system, in terms of prices and practices, has an unhealthy impact on agriculture. The high-level committee has made a number of recommendations to correct the system.

The procurement price system, which is built around the FCI, offers higher and higher minimum support prices (MSP) every year for wheat and rice, incentivising  farmers to grow these grains and discouraging them from growing pulses, oil seeds and fruits and vegetables. This upsets the needed balance in agriculture, hurts the soil and puts pressure on the economy in many ways. The committee recommends direct cash transfers to farmers and PDS consumers. It is advantageous to both and will lead to large savings for the exchequer because the FCI spends as much on storage as on procurement. The savings, which will run into tens of thousands of crores, can be used to improve agricultural infrastructure.

Competition with private trade will work in favour of both farmers and consumers. The committee has also recommended that buffer stocking should be rationalised. The FCI stores much more grains than what is needed even in a situation of multiple emergencies. Reduction in storage can reduce wastage and avoid blocking of thousands of crores of money in idle godowns.

The committee has also made a proposal to shift procurement activity to states where it is not undertaken now, like the eastern region. It will boost agricultural production there, though this may be opposed by the present surplus states which have tax income from the procurement activity at their mandis. The committee has also recommended modernisation of storage and transport, like using silos and containers instead of gunny bags. Some of the proposals may not be new, but they are sensible. If the government finds it difficult to implement the recommendations immediately and at one go, it should implement them in phases over a period of time.