Food Corporation of India (FCI)

The Food Corporation of India (FCI) is an important institution of the government of India. Read here to know more about it.

The Food Corporation of India was set up in 1965 under the Food Corporation’s Act of 1964.

FCI is a statutory body and Public Sector Undertaking (PSU) under the Ministry of Consumer Affairs, Food and Public Distribution.

FCI was set up to fulfill the objectives of the National Food Policy:

• Effective price support operations for safeguarding the interests of the farmers.
• Distribution of food grains throughout the country for the public distribution system.
• Maintaining a satisfactory level of operational and buffer stocks of food grains to ensure National Food Security

Since its inception, FCI has played a significant role in India’s success in transforming crisis management-oriented food security into a stable security system.

In its 58 years of service to the nation, FCI has played a significant role in India’s success in transforming crisis management-oriented food security into a stable security system.

FCI has its Headquarters in New Delhi with five Zonal Offices, twenty-five Regional Offices, and 170 District Offices under its control.

Objectives of Food Corporation of India (FCI)

• To provide farmers with remunerative prices
• To make food grains available at reasonable prices, particularly to the vulnerable sections of the society
• To maintain buffer stocks as a measure of Food Security
• To intervene in the market for price stabilization

Vision & Mission of FCI

The vision of FCI is Ensuring Food Security for citizens of the country. The mission is:

• Efficient procurement at Minimum Support Price (MSP), storage, and distribution of food grains.
• Ensuring availability of food grains and sugar through appropriate policy instruments; including maintenance of buffer stocks of food grains.
• Making food grains accessible at reasonable prices, especially to the weak errand vulnerable sections of the society under PDS.

Functions of Food Corporation of India (FCI)

It has primary duty to undertake purchase, store, move/transport, distribute and sell food grains and other food items.

FCI thrives to transform food security into a stable security system to ensure availability, accessibility, and affordability of food grains to all people at all times so that no one, nowhere, and at no time should go hungry.

Procurement: The Central Government extends price support for the procurement of wheat, paddy, and coarse grains through the FCI and State Agencies.

• All the food grains conforming to the prescribed specifications are procured by the public procurement agencies at the Minimum Support Price (MSP) plus the incentive bonus announced.
• FCI has also been nominated as an additional nodal Agency for the procurement of Pulses and Oilseeds.

Decentralized Procurement Scheme (DCP): It was introduced in 1997-98 for food grains to be procured and distributed by the state governments themselves.

• The designated States procure, store and issue food grains under the Targeted Public Distribution System (TPDS) and other welfare schemes of the Government.

Quality control: The quality Control Division of FCI ensures the procurement of food grains from procurement centers strictly by Govt. of India’s uniform quality specifications.

Distribution: FCI meets the requirements of TPDS through grains procured which are issued at a Central Issue Price fixed by Government.

• FCI delivers food grains to State Agencies from its base depots for distribution through Fair Price Shops.

The role of FCI is important as the National Food Security Act, 2013 commits to distributing grains through TPDS and other welfare schemes at highly subsidized prices.

Public distribution system: Public Distribution System (PDS) evolved as a system for the distribution of food grains at affordable prices and management of emergencies.

• The center is responsible for procuring the food grains from farmers at a Minimum Support Price (MSP).
• The MSP is the price at which the FCI purchases the crop directly from farmers; generally, the MSP is higher than the market price.
• The MSP is set by the Commission for Agricultural Costs and Prices (CACP).

PDS is operated under the joint responsibility of the Central and State Governments. The Central Government, through FCI, has assumed the responsibility for procurement, storage, transportation, and bulk allocation of food grains to the State Governments.

Commission for Agricultural Costs and Prices (CACP)

The Commission for Agricultural Costs & Prices (CACP) is an attached office of the Ministry of Agriculture and Farmers Welfare, Government of India.

It came into existence in January 1965.

The Commission comprises a Chairman, Member Secretary, one Member (Official), and two Members (Non-Official).

• The non-official members are representatives of the farming community and usually have an active association with the farming community.

Functions of CACP:

• It is mandated to recommend minimum support prices (MSPs) to incentivize the cultivators to adopt modern technology and raise productivity and overall grain production in line with the emerging demand patterns in the country.
• MSP for major agricultural products is fixed by the government, each year, after taking into account the recommendations of the Commission.
• As of now, CACP recommends MSPs of 23 commodities, which comprise 7 kinds of cereal (paddy, wheat, maize, sorghum, pearl millet, barley, and ragi), 5 pulses (gram, tur, moong, urad, lentil), 7 oilseeds (groundnut, rapeseed-mustard, soybean, sesamum, sunflower, safflower, nigerseed), and 4 commercial crops (copra, sugarcane, cotton and raw jute).

CACP submits its recommendations to the government in the form of Price Policy Reports every year, separately for five groups of commodities namely:

1. Kharif crops
2. Rabi crops
3. Sugarcane
4. Raw Jute
5. Copra

Before preparing the aforesaid five pricing policy reports, the Commission draws a comprehensive questionnaire and sends it to all the state governments and concerned National organizations and Ministries to seek their views.

• Separate meetings are also held with farmers from different states, state governments, and National organizations like Food Corporation of India (FCI), NAFED, Cotton Corporation of India (CCI), Jute Corporation of India (JCI), trader’s organizations, processing organizations, and key central Ministries.
• The Commission also makes visits to states for on-the-spot assessment of the various constraints that farmers face in marketing their products or even raising the productivity levels of their crops.

Based on all these inputs, the Commission then finalizes its recommendations/reports, which are then submitted to the government.

The government, in turn, circulates the CACP reports to state governments and concerned central Ministries for their comments.

After receiving the feedback from them, the Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by the CACP.

Once this decision is taken, CACP puts all its reports on the website for various stakeholders to see the rationale behind CACP’s price and non-price recommendations.

Issues with FCI and recommendations for improvement

Food Corporation of India has been marred by numerous shortfalls over the years in the areas of timely procurement, storage, and distribution.

This led to the formation of a high-level committee (HLC) led by Shanta Kumar for restructuring FCI. The committee recommendations were:

• Procurement: The committee recommended that all procurement made by the FCI should be handed over to the states that gained experience in this matter and created the necessary infrastructure for the same
• Negotiable warehouse receipt system: A warehouse receipt system should be made negotiable as this can help farmers deposit their produce at the registered warehouses. They can then sell it at a price suitable for them and at the same time reduce the cost of storage for the government.
• Revision of the MSP Policy: The HLC recommended that pulses and oilseeds should also be in the MSP category. At present MSP for 23 commodities are announced with priority given to wheat and rice, but the MSP was applicable in only selected states. The present arrangement creates a disproportionate price structure that favors wheat and rice.
• Storage and movement: HLC recommended that the Food Corporation of India (FCI) should outsource its stocking operations to various agencies such as Central Warehousing Corporation, State Warehousing Corporation, the Private Sector under the Private Entrepreneur Guarantee (PEG) scheme, and even state governments that are building silos through a private sector on state lands.
• The committee had recommended that the government should relook at the coverage (67% of the population) under the NFSA as it’s on the ‘higher’ side.