By Vishal Sridhar

Edited by Sanchita, Associate Editor, The Indian Economist

Food Corporation of India (FCI) is the backbone of India’s Food Security. The Plans to restructure and improve its facilities had featured in almost all the Budgets that were presented by the previous Congress-led UPA Governments. But none made any momentous improvements. So either there weren’t any such plans in the first place or that the Government was incompetent to implement them. Whatever be the case, the hard truth is; the Food Corporation of India is in a complete mess.Thanks to ineffective storage, corruption and futile policies.

Swashbuckling players like Sehwag and Gayle are envied by us predominantly when they go on a rampage against the bowlers. It’s their instinct behaviour that instigates an adrenaline rush on the viewers. And purely because of this, they are loved all over the world. The Chinese grew on this similar aggressive path, going all out on manufacturing low-priced products. If the former was all about hitting sixes & fours, the latter believed in industrialization-driven economic growth. And since the present Government looks to deploy such behaviour in the economy, a quick revival of the Food Sector is a must. Else a wrecked FCI coupled with rising inflation will surely play spoilsport to the Government’s dream of high growth rates & industrialisation. And her primary purpose of coming to power will remain unfulfilled.

The Food Corporation of India was setup under the Food Corporation’s Act 1964 to provide reasonable price support to the farmers, ensure proper distribution of food grains throughout the country and maintain sufficient buffer stock to feed the people during the time of crisis. But off board, this institution neither served to the interest of farmers nor ensured proper supply of foodgrains. It remains to be India’s Biggest Hoarder of Food grains.

4 X Buffer Stock Needs?

Consider this. In May 2014, the Government had 548 lakh tonnes of Rice+Wheat and an additional 123 lakh tonnes of unprocessed paddy which makes 6.71 million tonnes of total Rice & Wheat. This was 4 times more than our buffer stock needs. And eventually these stocks were neither brought into the domestic market nor exported to other countries. Thus provided a perfect platform for the corruptive agencies to hoard and sell certain portion of the total store and leave the rest to rot.

The Food Corporation of India has been setup to buy grains from the farmers and store them in warehouses. But is it necessary to store more than 4 times our need? And why should FCI remain the primary buyer of grains from the farmers? It’s significant for the government to find ways to provide better prices to farmers through Private players and pull a RBI out of FCI by making them the ‘Buyer of the last Resort’.

When a Retail store is allowed to make 100% or 200% profits on Aatas and other food grain by-
products, why restrict the farmers from making even a 50% profit on his produce? At the end of the day, he’s the fundamental pillar to our food security and it’s crucial for the government to strengthen this pillar. Also an active participation by the state Governments is a must to revive the FCI.

Warehousing & Not Hoarding!

As my close friend from college says, “It’s not hoarding but the ineffective warehouses that has ruined the FCI…” True, He’s spot on. There aren’t enough warehousing facilities across the country. The Government should decentralise the power to the state government in terms of owning facilities and amount of produce it can purchase from the farmers. Also a PPP model involving the State and the Private players could be tried out to ensure proper Warehousing facilities. A cap on the amount of grains stored should be limited only to our buffer stock needs and the rest should either be distributed through PDS or should be used to bring in more dollars.

FCI & Inflation

The ingrained reason for the present inflation is in the over significance given to Cereal Production (Rice & Wheat) over Protein goods like Fruits, Vegetables, Milk and Eggs. It’s the Onions that have made people cry and not the Popcorns. The mounting prices of Potatoes and Tomatoes and other fruits have wreaked havoc on the Aaam Aadmi. The rampant spread of Diabetics and Obesity among the Indians and their obsession to have a Fit body has ensured more intakes of proteins than Rice or Wheat. Thus a decline in consumption combined with rising production of cereals has neither benefitted the Government nor her people. Thus the Government should come up with a framework to integrate the storage and distribution of both Cereals & Pulses based on their market demands.

“Government is committed to reforms in the food sector. Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS would be taken up on priority…” our Union Finance Minister said in his Budget 2014 Speech. Let’s hope that at least Arun Jaitley keeps his word.

An aspiring economist, Vishal Sridhar lives in Ashok Nagar, Chennai. He will be graduating from Loyola College in 2015. Apart from Economics, Indian Politics and her history fascinate him. He’s thrilled to scrutinize the NaMo Government and his affiliation with Raghuram Rajan. An enthusiastic learner, he loves to pen down his thoughts on the various economics and political issues. He takes life as it comes and strongly believes that everything in life happens for a reason. He wishes to travel across India to experience her rich culture and traditions. He’s very keen on interacting with people and loves to exchange thoughts on various subjects. Don’t hesitate to connect with him at FB or to drop an email at vishalgany@gmail.com.

Posted by The Indian Economist | For the Curious Mind