- What is Food security?
- Origin of FCI
- Timeline of Food management in India
- Disturbing Numbers: FCI and Food Mismanagement
- Shanta Kumar Committee on FCI restructuring
- Criticism against Shanta Kumar report
- Appendix: FCI structure
- Mock Questions for CSAT
What is Food security?
Food and agriculture organization (FAO) says Food security is made up of four pillars viz. Availability, Affordability, Nutrition, and Stability.
Food security Pillar | What has India done to achieve it? |
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food should be available in sufficient quantity at all times and at all places |
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Food should be affordable To poor people | Through Targeted-PDS and National Food Security Act (NFSA), Government provides cheap grain to poor. |
Food should be nutritious to ensure healthy development of body of mind. | Through Mid-day meal, Food-security Act, Integrated-Child Development scheme (ICDS) and half dozen other schemes, Government ensures nutritious food to children. |
In food prices and supply must be stable. Otherwise political and social unrest. | FCI keeps ‘buffer-stock’ of grains. It can be sold to open market or distributed among people during high inflation, natural disaster etc. |
Origin of FCI
- In the 50s and 60s, India faced major shortage of grains.
- Our domestic wheat-production was very low. Our foreign exchange reserve too was very low. We could not sustain wheat-import from global market from our own. Therefore, we had to reply on American PL- 480 “Food for peace” program. But the shipments were irregular.
- Finally Government decided to end this humiliation by focusing on ‘self-sufficiency’ in food production.
- We imported high yielding seeds (HYV) of wheat from Mexico, distributed them to farmers along with subsidized fertilizers.
- End result is known is “Green revolution”. You can read more about its features, phases and limitations in NCERT Class 11 Economy, page 24 onwards.
1950s | State Government begin enacting their Agricultural Produce Market Committee (APMC) Acts to ‘protect’ farmers. But it fails to curb the nuisance of middlemen, hoarding and inflation. For more click me |
1964 | Food corporation Act passed. Subsequently FCI setup in 1965. FCI falls under Ministry of consumer affairs, food and public distribution. |
1965 |
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1985 |
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1997 |
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1997 |
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2000 | Antyoday Anna Yojana: 25 kg foodgrain per family at the rate of Wheat Rs.2 and Rice Rs.3 per kilo |
2003 | Union Government drafts “Model APMC” Act, asks state governments to adopt it. Although many states yet to implement. |
2008 | Private Entrepreneurs Guarantee (PEG) Scheme under Department of Food & Public Distribution (DFPD). Under this scheme, new godowns will be constructed on PPP finance, FCI will hire private godown to store public-procured food grain for contractual period of 10 years. |
2010 |
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2010 | A new statutory body- Warehouse Development and regulatory authority under consumer affairs ministry. It certifies warehouses and resolves disputes related to Negotiable Warehousing Receipts (NWR) |
2013 | National Food security Act passed. click me for more detailed article |
Disturbing Numbers: FCI and Food Mismanagement
23 | Is the number of crops for which, CACP announces minimum support prices (MSP). This includes even non-food crops such as cotton and jute. But… |
Only 6% |
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40-60% |
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Double | For the last 4-5 years, FCI has stored double the grains than prescribed buffer limits. Result? (1) shortage in open market and thereby inflation (2) rotten grains due to FCI’s limited Storage capacity. |
8-12% | Was the food-inflation in recent years, YET Government did not release grains from its FCI-warehouses to increase supply and curb inflation. |
58% | Of subsidized foodgrain doesn’t reach BPL families. (Planning commission, 2005) |
1.15 lakh Cr. | Is the official budget allotment for implementing food security act, to cover 67% of Indians (2014-15) |
YET only 11 | States have so far implemented food security act. Haryana, Delhi, Himachal Pradesh, Rajasthan, Punjab, Karnataka, Chhattisgarh, Maharashtra Chandigarh, Bihar and Madhya Pradesh. Other states are given time extension because they’re yet to even identify the beneficiaries. |
9 cr. | Is the number of agriculture households in India. 3/4th of them not even aware of MSP system. (NSSO, 2012) |
Bottom line is, FCI has failed in all three objectives because
Objective | Why fail? |
1.Procurement | Large number of farmers are out of the MSP regime. |
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2.Storage | Large quantity of food grain either siphoned off or gets rotten |
3.Distribution | Targeted PDS system has unacceptably high leakages. |
In the light of these problems, Shanta Kumar Committee was setup
Shanta Kumar Committee on FCI restructuring
Chairman |
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Purpose |
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Duration | Setup in 2014-August, gave report in 2015-January. |
Relevance | UPSC Mains examination:
hence this 15 page Ph.D article |
Let’s check his recommendations one by one:
#1: Outsource procurement to State Governments
Shanta says FCI must not handle grain procurement for entire India
Avoid these areas | Focus here |
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Punjab, Haryana, Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Odisha | Eastern Uttar Pradesh, Bihar, West Bengal, Assam |
These state Governments already have sufficient experience, manpower and infrastructure to procure grains for their own PDS requirements. |
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FCI itself Procure grains from the states, until the situation improves. |
#2: Procurement Payment reforms
- Popularise Negotiable Warehouse Receipt System (NWRs). Encourage farmer to deposit his produce to an authorized-warehouse, get a receipt, and borrow agriculture loan for next crop-cycle, from banks and cooperatives, by pledging those receipts. Loan-Value of such receipts will be 80% of the MSP x quantity stored in warehouse.
- If market prices dip below MSP, government should only ‘compensate’ farmer for the losses incurred, but without procuring grain. i.e. let them store and sell it to private players later on when market recovers.
- If state government pays additional bonus over and above the MSP to its farmers (mainly for vote-bank politics) still FCI should not procure more grain from that state, once buffer stock quota is filled. [At present FCI indulging in “open ended procurement” i.e. all incoming grain is accepted, even if buffer stock is filled.]
- FCI or third party must perform Quality check before accepting grains from state government agencies and farmers. Don’t accept substandard grains.
- On FCI procurements, State government levy commission between 2% to 15%. There should fix uniform rate for entire India – just 3%.
#3: Buffer stock reforms
- FCI is supposed to maintain “buffer stock” of grains- to ward of any emergency food-shortage situation during natural disaster, famine or war.
- But over the years, FCI has overcrossed buffer stock norms- leading to rotten grain and shortage in open market. Observe following graph:
Why FCI did overcross Buffer stock norms?
- Lack of coordination. While FCI is basically a “keeper” of grains. But how much grain should be stored as “buffer/backup” for emergencies?- Consumer ministry decides that.
- For vote bank politics, Union Government always increases MSP for wheat and rice each year. AND state governments too offer additional “BONUS” to farmers above MSPs. Hence most farmers prefer to grow rice-wheat instead of moving to vegetables and edible oils.
- Given this ‘oversupply’ of what and rice- the Market forces will offer lower prices to farmers. So, big farmers from rich states approach FCI and state procurement agencies.
- “Open ended procurement” i.e. FCI doesn’t have a quota in mind- whatever wheat/rice the farmers/state agencies supply to FCI- it purchases all of it.
- Ideally, FCI should sell-off the excess foodgrains, above the buffer quota, to open market- that’ll increase retail-supply and stabilize prices.
- But there is no ‘automatic-liquidation-rule’. It all depends on Government’s mood.
Results?
- Rotten wheat on one side+ food inflation on other side=> Crores of rupee wasted by both Government and consumers.
- Government randomly bans export bans on wheat-rice during food inflation, without finding the underlying reasons. This hurts our export competitiveness particularly in rice- where India is world’s largest exporter.
To implement Food security Act | ~61MMT |
Strategic Reserve | 5 MMT |
Forex currency reserve | Sufficient to import
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Whenever FCI has grains above buffer norms, it should automatically sell excess stock in open market. a.k.a. “Pro-Active Liquidation Policy”.
No harm in importing
- Reduce import duty on wheat and rice.
- Instead of keeping excessive buffer/backup storage, just store in moderate quantity. And as and when required, simply import rice and wheat from world market.
- Same way, instead of transporting rice from Andhra Pradesh/Punjab to North East, it’s cheaper to import rice from Myanmar to North East.
#4: Storage reforms
- FCI should gradually outsource grain-storage function to central warehousing corporation (CWC), state warehousing corporation (SWC), and private sector players- under Private Entrepreneur Guaranty (PEG) Scheme) on competitive bidding- give them contract to store FCI grains for 20 years.
- Don’t store grain in “Cover and plinth” godowns. Convert them into “Silos” with Mechanized / robotic assemblies, with help of private sector. Madhya Pradesh has already begun doing this.
- End to End computerization and Online tracking of entire system from procurement to retail distribution.
- North East and Jammu Kashmir state Governments must create storage capacity that can last for 3 months. So, even sustain during bad weather, natural disaster and bandh-hartals, there is no shortage of food, even if they’re cutoff from rest of India.
- If grains are transported in containers, instead of gunny-bags, it’ll reduce losses, get faster-turn-around time at railways and waterways.
- Immediately after the procurement, give 6 months’ ration to poor-beneficiaries, with cheap-grain bins for storage. Result? FCI will have to store less grain in its godowns. Juntaa themselves will take care of storage.
#5: Transport reforms
- As far as possible, grain should be transported in containers. It should be packed in gunny backs only at District HQ level- from where it’ll be transported to retail outlets
- Stop labourers from using iron hooks to lift gunny bags. Provide bags with “ears” to eliminate hook-requirement.
- As and where possible, use forklifts instead of manual labour.
- Improved night security at rail-points, because >85% of PDS Grain is transported through railways and maximum siphoning off occurs here.
- Construct silos at mandis, and provide rail connectivity to them.
- As and where possible, use inland water transport for moving wheat and rice. Example from Visakhapatnam to north-east and Kerala. Improve rail connectivity between such ports and their hinterlands.
#6: Direct cash transfer to Farmer
Present system | Shanta Says |
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#7: Direct cash transfer to Consumer
Grain | MSP Rs./quintal (2014) |
FCI’s Real Cost |
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Rice | 1360 (common grade)1400 (“A” grade) | Rs. 3,000/quintal |
Wheat | 1400 | Rs. 2,200/quintal |
Suppose, Government wants to ensure all poor families get Rice at Rs.3 /kg.
MSP-PDS regime |
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Direct cash transfer |
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How to implement Direct Cash transfer?
- First link Jan Dhan accounts with Adhar card UID numbers.
- Money be transferred to lady of the house under “Direct Benefit transfer” (DBT)
- Amount should be linked with inflation index.
- People will be given free choice to purchase whatever food they want- rice, wheat, milk, vegetables.
- First, begin this cash-transfer process in big cities with over 1 million population. Then to states with grain surplus.
- Complete this process within 2 to 3 years.
- J&K and North-east State governments should be given the option to either continue physical grain distribution or adopt cash transfer.
#8: Curtail National Food security Act (NFSA)
Food Security Act 2013 prescribes | Shanta Kumar observes |
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Cover 67% of Indian population (such that, 50% urban and 75% rural public covered) |
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State Government to identify the beneficiaries, distribute grains at subsidized rate and if they fail they’ve to give money to the families. | So far only 11 states finished this process. Other states given time extension to implement NFSA. |
Antyodya households (AAY) – the bottom strata of BPL population will get 35 kg grain per family on monthly basis, at following price:
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Yes continue that. |
Priority households- those slightly better off than AAY-BPL families- they’ll get grains at Rs 3/2/1/kg. |
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Priority households get 5kg grain per person. |
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Free meals, take home ratios for children; pregnant and lactacting mothers to get cash installments and free meals; grievance redressal mechanism at district and state level. | Shanta Kumar silent on these issues because it’s beyond the subject-scope of the Committee. His Committee concerned with FCI-reforms. |
#9: Pink slips and VRS
Worker | Avg. monthly salary paid |
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FCI’s top 350 babus | Rs.4 lakhs per month! |
FCI’s departmental laborer | ~25,000 to 80,000/- |
Contractual Labour | Hardly 10,000/- |
Shanta Kumar recommends
- First begin mechanization of operations- to reduce manual labour requirements.
- Reduce the number of Zonal and regional offices. Keep direct touch with state agencies via e-governance modules.
- Then give VRS to FCI’s permanent staff.
- At top level, hire executives from private sector (instead of replying Generalist-IAS on deputation).
- As and where possible simply outsource or hire dailywage contractual laborers.
- Result? Leaner and nimble FCI, low-cost of operations and higher “economies of scale”.
Criticism against Shanta Kumar report
Since Shanta Kumar criticized FCI, then someone must criticize Shanta Kumar to complete the Karma-Cycle. And who is more qualified to perform this ‘religious duty’, than the columnists at theHindu newspaper? So let’s begin:
Angry trade union | Shanta recommends FCI to hire contractual staff, close regional offices and give VRS to employees. Trade union leaders don’t like it. Not one bit. |
Survey method wrong |
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Privatization wrong |
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Poors left out |
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Bowing to “Imperial” Masters |
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Farmer suicides |
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DBT idea is flawed:
- USA too uses similar “food stamp” program, but many poors misuse the foodstamps for purchasing liquor and even narcotic drugs.
- While food can be ‘shared’ among family members, cash can be misused-Even if cash transferred to lady of the house, there is no guarantee Indian husband won’t beat her up, loot the money and spend it on desi-liquor and gambling.
- Yes, Brazil Mexico and other Latin American nations use “Conditional cash transfers” but not only as a “Supplement” and not ‘replacement’ for their public distribution system.
- Such “Free cash” will increase bidi and gutka usage among rural men and women- every time they visit local kirana store. Sometimes even shopkeeper will lure them saying he doesn’t have chillar- so take this gukta pouch! (Counter argument: with Rupay card the chillar problem will vanish, and family can fullfil “use Rupay card every 45 days” to claim accident insurance; Double-counter argument: banking penetration still low-many tribal families in remote areas will be left out for the lack of Jandhan account and outlets)
In short, Cash transfers are likely to bring in their trail predatory commercial interests and exploitative elements, eager to sell alcohol, branded products, fake insurance policies, Saradha-like-ponzi schemes or other items that would contribute very little to people’s nutrition or well-being. (Jean Dreze, Indianexpress )
Now let’s check Shanta Kumar’s major recommendations one by one:
Mock Questions for CSAT
[columnize]
Q1: Consider following Pairs of Committee vs their official mandate:
- Shanta Kumar: Restructuring of national food security act, Mid-day meal and other food distribution schemes.
- Usha Thorat: Granting licenses to small banks
- Nachiket Mor: Granting licenses to payment banks
Which of them are correctly matched?
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- all of them
Q2. Find correct statements
- National food security act aims to cover 65% of Indian population.
- Shanta Kumar Committee recommends this NFSA-coverage be reduced to 50% of Indian population only.
- Both A and B
- Neither A nor B
Q3. Arrange following in the correct chronological order
- FCI
- Target PDS system
- food security Act
- Nutrient Based subsidy (NBS)
Answer choices
- 1234
- 1243
- 2143
- 4123
Q4. Which of the followings are outside the purview of Agriculture ministry?
- FCI
- Minimum support prices to farmers
- Decentralized procurement system
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- all of them
Q5. Private Entrepreneurs Guarantee (PEG) is administered by
- Commerce ministry
- Finance ministry
- Consumer affairs ministry
- agriculture ministry
Q6. Official mandate of FCI includes
- public procurement of foodgrains
- storage of foodgrains
- distribution of foodgrains
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- all of them
Q7. Which of the following are recommended by Shanta Kumar Committee on FCI restructuring
- FCI alone should handle all procurement throughout India
- Create a separate autonomous body to perform quality checks on the grains procured by FCI
- FCI’s contractual staff should be converted into full-time permanent staff.
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- None of them
Q8. Which of the following are not recommended by Shanta Kumar Committee on FCI restructuring
- Coverage of National food security act should be widened.
- Priority households under NFSA should be given more grain allotment
- Antyodaya households should be given grains at 50% below the MSP
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- None of them
Q9. Shanta Kumar Committee on FCI restructuring has recommended building “Strategic” reserve of foodgrains. Under which
- 5MMT grains to be stored in physical form
- 5MMT grains-equivalent to be stored in forex currency form
- Both A and B
- Neither A nor B
Q10. Shanta Kumar Committee on FCI restructuring has recommended which of the following measures?
- To provide livelihood to jute industrial workers, FCI must transport grains in only in jute gunny bags – right from procurement to retail distribution chain.
- To ensure employment to manual-laborers, FCI godowns should avoid usages of forklifts and other mechanized instruments.
- Both A and B
- Neither A nor B
Q11. For cash transfer, which of the following are not recommended by Shanta Kumar Committee?
- Farmers be given subsidy on per hectare basis.
- Direct benefit transfer to PDS-Consumers must be rolled out first in J&K and North-east where leakages are maximum
- Cash transfer should be made in the jandhan account of the patriarch of the family
Answer choices
- Only 1 and 2
- Only 2 and 3
- Only 1 and 3
- None of them
[/columnize]
[line]
Descriptive Questions for mains examination:
- From the food-shortages of 1960s, India has moved into food-surpluses in post-2010 period, but somehow the FCI-TPDS has not able to deliver on its objectives very efficiently. Critically examine the reasons and suggest remedies.
- Since its inception, FCI’s procurement and buffer norm practices have been ‘tonnage centric’ rather than ‘farmer centric’ or ‘poor centre’. Discuss how it has hurt Indian economy and people.
- Shanta Kumar Committee has asked Government to reduce the coverage of NFSA in the interest of fiscal consolidation. Justify your stand on this recommendation.
- “To prescribe direct cash transfer as the panacea for the ills of poverty and hunger, is an oversimplification of the problem.” Elaborate.
- “Decentralization and private sector participation is essential for efficient management of procurement and public distribution system of Modern India”. Elaborate.
- Define Food security and list the measures taken by Government of India to ensure food security in India.
- (interview) Apart from what Shanta Kumar recommended, what other suggestions would you make for reforming PDS system in India? What if we simply privatize FCI?
Thankyou very much mrunal sir& rajtanil mam:-)
THANKS SIR
Pls notify me about any new posts on the website.
Than u sir for everything .Please upload economic notes and geography .It
will help both in prelims and main if passed.
thanks mrunal sir..
I have a doubt regarding Nutrient Based Subsidy.. how non inclusion of urea under NBS is resulting in its over use??
Someone pls clarify..
Hi Nila,
In NBS , govt. fix the subsidy on the nutrients ‘N’ – Nitrogen, ‘P’ – Phosphorus, ‘K’ – Potash and ‘S’ – Sulphur contents and MRP is fixed by companies. Hence, when the input cost goes up, the price goes up, since subsidy is fixed. In case of urea, it’s MRP is fixed by govt., due to which it’s relative cost is much less than other fertilizers.
What govt. should do is to fix the subsidy for urea as well, and let market decide the price, that will make the price of all the fertilizers , so that farmers choose the fertilizer, not based on price but based on the soil requirement.
Thanks Praveen_R
Sir, as per the book Indian Economy by Sanjiv Verma, the AAY scheme offers 35kg of wheat and rice. I hope my stats are correct regarding this as 25kg has been mentioned above.
Great simplicity
DBT Reform
(For Interview)
Instead of sending money in Bank a/c, they should be loaded with “Digital Food/Goods”, once the person goes to the shop, s/he can use the RuPay card to convert the digital item into physical item with paying subsidised amount. The shopkeeper will be given the remaining amount by Govt. on market price as proof of sale will also be there.
how many backward talukaa accordig SANTAKUMAR COMMITY
can we have correct answers of mcqs ?
tank u so much sir….
I disagree
Still relevant. Where did my earlier comment go in which i wrote Bibek Debroy recommendation?!