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FCI revamp committee suggests lower food security law coverage

The committee constituted by the government on how to reform the Food Corporation of India (FCI) — it gave its report this week — suggested limiting foodgrain distribution under the National Food Security Act (NFSA) to 40 per cent as against the current norm of 67 per cent, thus, saving the exchequer around Rs 30,000 crore per year.

It, however, wants more to be given to households classified as below poverty line (BPL), seven kg a head instead of five kg in a month. The coverage of 67 per cent would mean a subsidy of Rs 1.3 lakh crore a year and that of 40 per cent would mean Rs 77,000 crore a year, at five kg each of grain. If seven kg is given, the subsidy will be Rs 1.07 lakh crore.   The committee has also suggested that the food ministry should be quick to export grains or sell them in the local market as soon as FCI procures more than the requirement.

“The government should defer implementation of NFSA in states that have not done end-to-end computerisation, have not put the list of beneficiaries online for anyone to verify and have not set up vigilance committees to check pilferage from the Public Distribution System ,” said the committee’s report.

Former Union food minister Shanta Kumar, who chaired the committee, said the report was pro-farmer and pro-poor, and followed the Gandhian ideal of Antyodaya (succour to the poorest). “We (Bharatiya Janata Party) had objections to the NFSA while in opposition but had to support it in Parliament due to electoral compulsions. Now, we want to correct the mistakes,” Kumar told reporters.

In a related development, a day after Prime Minister Narendra Modi directed the food ministry to give its comments to the report, senior officials said they have started the process of implementing some of the recommendations “like increasing the supply of jute bags and computerisation of public distribution system”. Food Minister Ram Vilas Paswan told Business Standard the department will study all suggestions and consult other ministries before forming a view.

The FCI revamp committee had said beneficiaries covered under the Antyodaya Anna Yojana, numbering around 30 million households on the basis of a 1992-93 census, should continue to get foodgrain through the PDS at highly subsidised rates of Rs 3 a kg for rice, Rs 2 for wheat and Rs 1 a kg for coarse cereals.

Those outside this classification but priority households should get grain at a price which is half the government’s minimum support price.

Under the current form of the Act, foodgrain is to be allocated to all beneficiaries at a uniform Rs 3 a kg for rice, Rs 2 a kg for wheat and Rs 1 a kg for coarse cereals each month. This price would remain for three years.

The panel also suggested the government gradually move to cash transfer of the subsidy in the PDS, starting with the 50-odd cities having a population of more than a million. “This could be extended to the foodgrain surplus states and thereafter the deficit states could be given the option of either cash or physical grain distribution,” its report said.

“If the report is implemented in full, it will have a magnificent impact on the poor of this country and add an extra income of Rs 3,000 crore per annum for the poor, helping bringing around 15 crore (150 mn) out of poverty,” said Shanta Kumar.

The panel estimates if food subsidy is transferred in cash, it will save the exchequer around Rs 30,000 crore per annum in subsidies, while giving a better deal to consumers. “Our vision of FCI is an organisation which reaches its glorious past,” said Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices (CACP). He was a member of the panel.

The committee also suggests FCI hand over procurement of wheat and rice to the state governments in Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab. And, concentrate on Uttar Pradesh, Bihar, West Bengal and Assam, where farmers resort to distress sales due to poor state procurement and are dominated by small land holdings.

Suggestions of the FCI panel and its impact

Recommendation: Limit food entitlement under the National Food Security Act to 40 per cent as against the current 67 per cent
Impact: Could save the exchequer around Rs 30,000 crore per annum, assuming MSP is constant

Recommendation: Food subsidy in its entirety should be transferred in cash
Impact: Could save the exchequer another Rs 30,000 crore per annum. Rough estimates show if all recommendations are implemented in full, about Rs 3,000 will come to the account of an average BPL cardholder per year

Recommendation: FCI limits foodgrain procurement in northern states and focuses more on eastern India
Impact: Could stop the corporation from undertaking open-ended purchase of wheat and rice in Punjab, Haryana and Uttar Pradesh, leading to overflowing stocks, and help improve the condition of farmers in eastern India

Recommendation: Direct fertiliser subsidy to farmers
Impact: Could lead to income of around Rs 7,000 per hectare for farmers and help in bettering the nutrition ratio in soil

Recommendation: Allowing private companies in procurement, storage of grains and optimally utilising the storage facilities of FCI
Impact: Will improve efficiency, lower economic cost of storage


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