Govt sets up committee to suggest restructuring of FCI

The government today announced the setting up of a high-level committee to suggest ways of restructuring the loss-making Food Corporation of India (FCI), to improve the functioning of the public distribution system (PDS).

The committee will explore ways of reducing losses on transportation, storage and distribution of foodgrains from FCI godowns to the PDS.

FCI, already faced with liquidity crunch from accumulated subsidy dues of Rs50,000 crore, has asked the government to clear arrears in a phased manner.

The government owed FCI a total of Rs50,000 crore in subsidy payments at the end of 2013-14, due mainly to shortfall in budget allocation in the last three-four years.

FCI has also asked the government to allow it to securitise the dues for raising funds from market, sources said.

Prime minister Narendra Modi had been advocating unbundling of the FCI to bring efficiency in administration and control food inflation.

The high-level committee consisting of distinguished persons and experts has been asked to recommend restructuring of FCI after considering various aspects of the present structure and functional areas of the organisation after consulting various stakeholders.   

The committee, with member of Parliament Shanta Kumar as chairman, will have chief secretaries of Punjab and Chhattisgarh.  (or their representatives) dean of IIM-Ahmedabad Prof G Raghuram, former chairman of the Commission for Agricultural Costs and Prices Ashok Gulati, dean of School of Economics at the University of Hyderabad Gunmadi Nancharaiah as members and the chairman-cum-managing director of FCI as member-convener and Ram Sewak Sharma, secretary (Electronics & IT) as special invitee.

The terms of reference of the committee are:

• Examine the present day administrative, functional and financial structure of FCI and modus operandi of its various operations;
• Study various models of restructuring or unbundling and suggest a best suited model for restructuring or unbundling of FCI to improve its operational efficiency and financial management;
• Suggest measures for overall improvement in management of foodgrains by FCI;
• Define or give suggestions to reorient the role and functions of FCI in MSP operations, storage and distribution of foodgrains and food security systems of the country;
• Suggest a way forward for strengthening and integration of supply chain of foodgrains in the country;
• Suggest the most efficient and cost effective model from the point of view of storage and least cost option of moving grains;
• Recommend scientific model of storage;
• Recommend rationalised mode of moving grains, including tracking of carriage; and
• Suggest the upgradation of technology in management of foodgrains.

The committee will prepare a consultation paper relating to its terms of reference for circulation among the various stakeholders as well as seek comments/suggestions from the public.

The committee may visit a few states of both DCP and non-DCP category and will take evidence from state government authorities, farmers, various players of foodgrains supply chain, public persons etc.   

The Food Corporation of India (FCI) is vested with vital responsibilities of the government, such as procurement, management of central pool stocks and distribution of foodgrains to state government agencies for various food security programmes.

FCI, however, is plagued with several functional and cost inefficiencies, which need to be removed for efficient management of foodgrains and saving costs.

The committee will submit its report to the government within a period of three months.
The FCI, set up under the Food Corporation Act 1964, is a nodal agency for procurement, storage and distribution of foodgrains to PDS and other welfare schemes.

Finance minister Arun Jaitley, in his budget 2014-15 speech, had given top priority to restructuring of FCI. He had said: "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."

The FCI restructuring was also one of the promises made by BJP in its manifesto for general elections this year.