Food Corporation of India

Food Corporation of India

Subject: Economy

Section: Food security

Context: Not a single grain of paddy has been damaged while being stored by the Food Corporation of India (FCI) since 2004, the Centre told the Lok Sabha on Wednesday.

About FCI:

FCI is a statutory body set up in 1965 under the Food Corporations Act 1964. It was established against the backdrop of major shortage of grains, especially wheat.

FCI has played a significant role in India’s success in transforming the crisis management oriented food security into a stable security system.

Functions of FCI

• To procure foodgrains
• To Maintain operational stock and buffer stock for food security
• Allocation of grains to state
• Selling grains to state at ‘Central Issue Price’
• Distributing and transporting grains to state

Procurement Procedure:

• The Central Government extends price support for 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 incentive bonus announced, if any.
• Under the Decentralized Procurement Scheme (DCP), introduced in 1997-98, food grains are procured and distributed by the State Governments themselves. The designated States procure, store and issue food grains under Targeted Public Distribution System (TPDS) and other welfare schemes of the Government.

For what purposes FCI maintains stock of food grains?

• All countries maintain some backup to tackle any possible food crises due to drought or any other natural calamity.
• At times there can be violent fluctuations in prices of important commodities due to macroeconomic imbalances for e.g. due to short term price rises in production can soon shift from essential food crops to cash crops.
• In the aftermath of LPG reforms, India stuck to its policy of maintaining sufficient physical stocks, in spite of pressure from developed countries in forums such as WTO.
• Another major reason for stocking of food is to serve the world’s largest public distribution system. As already said, passage and implementation of FSA is expected to raise procurement upside, which in turn will raise the need for stock maintenance.
• Last but not least, FCI under an open ended policy has no option but to buy whatever is offered to it by farmers.

 Operational Stock :

• Operational Stocks are defined as the minimum quantities required for running the TPDS/NFSA and ‘Other Welfare Schemes’ until quantities procured from the new crop. These are made out of current year production and are meant to be consumed in following year.
• While maintaining Operational stocks ‘intra-year variations’ are taken care of and in case of buffer stocks, ‘inter year’ variations are considered.

 Buffer stock

• FCI maintains stocks of grains in excess of what is needed for meeting operational needs, and these stocks are called strategic stocks. Buffer stocks are part of strategic stock.
• The government fixes the buffer stock norms, prescribing the minimum quantities of food grains (wheat and rice) to be maintained in the central pool at the beginning of each quarter.