5 days ago
India can't fix food security with more grain alone. FCI at 60 needs a nutrition agenda
With the recent equity infusion of Rs 10,157 crore, FCI is expected to play the salient role in the implementation of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) — certainly until December 2028, and most likely beyond. Both its core objectives — effective price support for farmers and provisioning food grains for Public Distribution System (PDS) and Other Welfare Schemes (OWS) — are now firmly entrenched in the political economy of the country.
Cut to today, India's annual food grain production stands at 332 MT, and as per Niti Aayog estimates, the last decade saw the most visible reduction in poverty — from 29.17 per cent to 11.28 per cent. The Food Corporation of India (FCI) has moved to a swank corporate office in New Delhi, and its network has expanded to include 25 regional offices and 170 district offices.
After the enactment of the Food Corporations Act, 1964, C Subramaniam, the food and agriculture minister in Lal Bahadur Shastri's cabinet, invited noted academician TA Pai to helm the new organisation with an authorised capital of Rs 100 crore and an equity of Rs 4 crore. The headquarters was established in Madras — as Chennai was then called — and the first district office was in Thanjavur. India's annual harvest was at its nadir — at 62 MT. Poverty had touched 44 per cent, according to VM Dandekar and N Rath, and 54 per cent, according to Pranab Bardhan.
Milestones and challenges
Six decades ago, when it was established, the FCI was at the forefront of India's quest for food self-sufficiency. It received accolades for its intervention in ramping up the procurement of paddy and wheat during the Green Revolution to support an expanded PDS.
By the mid-1970s, supply began to outstrip demand. The warehousing and logistics infrastructure could not keep pace with rising production, and rats had a field day at railway stations where grain was stored in the open.
Unlike the National Dairy Development Board (NDDB), which kept pace with technology and insulated its operations from power brokers, the FCI failed on both counts. It was dubbed 'a behemoth that had long outlived its purpose'. Yet reforming it remained a political hot potato, especially during the era of unstable coalitions in the 1990s.
The economic liberalisation of 1991 opened up the Indian economy, and many FMCG brands began to see the potential of packaging 'atta' and 'chawal' for the growing middle classes. Four years later, in 1995, WTO protagonists launched a major campaign against the FCI, criticising what they saw as trade-distorting subsidies, even though India's Agreement on Agriculture with the WTO allowed these staples to be placed in the 'Blue Box,' which sanctioned certain forms of government support.
Also read: MSP under Shastri began as a crisis response. Now India must ask what role it should play today
Decentralised procurement
By 1996-97, the procurement monopoly of the 'behemoth' was shared with state governments under the Decentralised Procurement Scheme (DCP). Apart from savings on transit, states also had to take direct responsibility for the quality of procurement and authentication of farmers. Of course, the deficit for either commodity was to be met by the FCI from its central pool (procurement over and above the state's own requirement). Thus for most states in the country, wheat was supplied from Punjab, Haryana and MP.
Antyodaya – upliftment of the last (poorest) person
During the first NDA regime under Prime Minister Atal Bihari Vajpayee, the government identified the poorest 1,00,00,000 families in the Below Poverty Line category and offered to them 35 kg of rice and wheat at a highly subsidised price of Rs 3 per kg of rice and Rs 2 per kg of wheat. It was expanded twice by an additional 50 lakh BPL families in June 2003 and August 2004. The general agreement was that while the Antyodaya families would get concessional food, those at BPL would be given food at 50 per cent of the MSP and the APL at 90 per cent.
NFSA 2013 and UN SDGs
Two years before the UN introduced the Sustainable Development Goals (SDGs), to which countries including India are signatories, India notified its own National Food Security Act on 10 September 2013. The Act aimed to cover 75 per cent of the rural population and up to 50 per cent of the urban population for receiving subsidised food grains under the Targeted Public Distribution System (TPDS). Together with MGNREGA, it addressed two top concerns — Zero Hunger and Zero Poverty.
However, alongside this political commitment, there was a growing campaign highlighting inefficiencies in the FCI's operations. Soon after assuming office in 2014, the NDA government established a high-level committee under the chairmanship of Shanta Kumar to examine all aspects of the functioning of the FCI and the PDS. The committee recommended that the FCI hand over all procurement operations of wheat, paddy, and rice to states with prior experience, such as Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha, and Punjab. It also suggested that the FCI shift its focus to supporting states and regions where farmers were in distress due to prices being significantly below the MSP — such as eastern Uttar Pradesh, Bihar, West Bengal, and Assam.
The committee also promoted the use of the Negotiable Warehouse Receipt system to enable farmers to receive 80 per cent of the value of their produce at MSP as an advance, and invited private sector participation in warehousing, logistics, and storage — thereby making the system more compatible with a market economy. It called for prioritising millets, pulses, and oilseeds, and for aligning MSP with trade policy to ensure that landed import costs do not fall below MSP. It recommended cash transfers indexed to inflation, and starting in September that year, the central government launched pilot projects for providing food subsidies through cash transfers in the Union Territories of Chandigarh, Puducherry, and urban areas of Dadra and Nagar Haveli. The response, however, was mixed.
The 15th Finance Commission, in its 2020 report, suggested that food subsidies be partially offset by increasing the Central Issue Price (CIP) of subsidised food grains. It also noted a decline in the share of cereals in food consumption, especially a reduced preference for wheat and rice.
But then came Covid-19. FCI stocks became a blessing, enabling the country to extend free food to its most vulnerable sections to mitigate the distress caused by job losses and reverse migration. Free food grains were distributed from April 2020 to December 2022 under the PMGKAY. The scheme was then extended — first for a year, and then for an additional five years from January 2024. Under PMGKAY, the Centre has tasked the FCI and other state agencies with procuring food and organising its distribution to around 820 million people free of cost until December 2028. Initial estimates of around Rs 12 lakh crore over five years may be exceeded due to new census data and higher MSP announcements in the coming years.
Also read: The real White Revolution—Shastri's NDDB built a farmers-first economy that still works
The call is political
According to Ashok Gulati, Distinguished Professor of Agriculture at the Indian Council for Research on International Economic Relations (ICRIER), the problem is not so much with the FCI, but with the policy framework. He questions the logic of providing cereals to over 67 per cent of the population at a time when the focus is on the thali index — cereals plus protein. He has suggestions with regard to both procurement and the PDS.
On the procurement side, he suggests that procurement be restricted to the requirements of the PDS, and that MSP should be offered only for crops best suited to their respective agroclimatic zones. In a written reply to the Rajya Sabha on 17 December 2024, the government acknowledged holding 367 LMT, against the required 210.40 LMT. Taking the Sangrur district of Punjab as an example — where the groundwater level had fallen by more than 25 metres during 2000–2019 — Gulati suggested that MSP in this district be restricted to millets and pulses, thereby cutting down on water, power, and fertiliser subsidies of about Rs 10,000 per acre (to be shared equally by the Centre and the state).
Likewise, he suggested converting the 5 lakh ration shops into multi-commodity nutrition hubs and giving each family a food subsidy of around Rs 8,000 per year to spend on a more diversified and nutritious food basket. This would also minimise the gap between PDS offtake and the NSSO data on actual food consumption.
Meanwhile, the FCI is at the forefront of bringing about structural change in its procurement operations. The AI-based Automatic Grain Analyser (AGA), which minimises human intervention to ensure greater transparency in the grain procurement process, and the Mixed Indicator Method (MIM), used to determine the age of custom-milled raw rice during its acceptance in central pool procurement, are some of the tools introduced by the FCI. Silo storage, container movement, and tamper-proof, high-security cable seals on railway rakes have resulted in a 96 per cent reduction in transit losses.
What is the final prognosis, then? The FCI has the technology, human resources, and financial muscle to implement the policy directives of the government. It has shown its resilience during times of crisis and is willing to take on additional responsibility as and when required. And if the mandate is expanded to make it the preferred procurement agency for the revamped PDS — comprising not just cereals but the entire range of agro commodities — the FCI will be able to take up the gauntlet.
This is the third article in a series on Lal Bahadur Shastri and the institutions he helped establish.
Sanjeev Chopra is a former IAS officer and Festival Director of Valley of Words. Until recently, he was director, Lal Bahadur Shastri National Academy of Administration. He tweets @ChopraSanjeev. Views are personal.
Disclosure: The columnist is a trustee of the Lal Bahadur Shastri Memorial (LBS Museum).
(Edited by Aamaan Alam Khan)
