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Submitted to:-
Submitted by:-
Prof. R.K. Vijaya Sarathy
Rupesh Kumar
Director, DSBS Bangalore Charu
Chandra
B
ajrang Agarwal
Bikash Prasad
Contents
1.Introduction
1.1Objective
1.2SWOT analysis
1.3Organizational chart
2 . Functions of FCI
3 . Public Distribution System
4 . Issues
5 . Conclusion
6 . Bibliography
Introduction
Food Corporation of India (Hindi: भभभभभभ भभभ भभभभ) was setup on 14th
January 1965 under Food Corporation Act 1964 with authorized capital of almost
$600 million to implement the national policy for price support operations,
procurement, storage, preservation, inter-state movement and distribution
operations.
It operates through 5 zonal offices and a regional office in Delhi. Each year, the
Food Corporation purchases roughly 15-20 per cent of India's wheat output and
12-15 per cent of its rice output. The losses suffered by FCI are reimbursed by the
Union government, to avoid capital erosion, and thus declared as a subsidy in the
annual budget. In 2007, such food subsidies were met by government bonds worth
almost $8 billion.
1.1Objective
The food corporation of India was setup in order to fulfill following objectives of
the food policy:-
Today it can take credit for having contributed a great deal in transforming India
from a chronically food deficit country to one that is self-sufficient
Strengths Weakness
1. Round the year availability of
materials 1. High requirement of working
2. Support from central capital
government 2. Inadequate automation with
3. Strong network of distribution regard to information
4. Excellent Storage Management management
3. Corruption at all level
4. Leakage
Opportunities Threats
Corporate Office
Zonal Offices [ 5 ]
Regional Offices [ 23 ]
FUNCTIONS Of FCI
1. Procurement
Procurement is the acquisition of goods and/or services at the best possible total
cost of ownership, in the right quality and quantity, at the right time, in the right
place and from the right source for the direct benefit or use of corporations,
individuals, or even governments, generally via a contract, or it can be the same
way selection for human resource. Simple procurement may involve nothing more
than repeat purchasing. Complex procurement could involve finding long term
partners – or even 'co-destiny' suppliers that might fundamentally commit one
organization to another.
To nurture the Green Revolution, the Government of India introduced the scheme
of minimum assured price of food grains which are announced well before the
commencement of the crop seasons, after taking into account the cost of
production \ inter-crop price parity, market prices and other relevant factors.
• Centers are selected in such a manner that the farmers are not required to
cover more than 10 kms.to bring their produce to the nearest purchase
centers of major procuring states.
• Price support purchases are organized in more than 12,000 centers for wheat
and also more than 12,000 centers for paddy every year in the immediate
post-harvest season.
• To name a few states about Rs.41,000 millions for paddy and 43,000
millions for wheat in Punjab and Rs. 45,000 millions for levy rice in Andhra
Pradesh is paid to the farmers/ millers during wheat / rice procurement
season.
• India today produces over 200 million tonnes of food grains as against a
mere 50 million tonnes in 1950.
• Each year, the Food Corporation purchases roughly 15-20% of India's wheat
production and 12-15% of its rice production.
• This helps to meet the commitments of the Public Distribution System and
for building pipeline and buffer stock.
The Deppt. of Food, GOI has recently formulated aforesaid policy for involving
Central Govt. Undertaking /State Govt. undertakings/for the Central Pool and
expanding the scope of MSP operations in the areas where FCI/State agencies
infrastructure for potential of procurement is weak and existing Govt. Agencies
(FCI and State Agencies) are not able to carry out MSP operations in such areas
where procurement exists to ensure that farmers are not denied the benefit of
MSP.
1. Storage
Another facet of the corporation is manifold activities is to provision of scientific
Storage for the millions of tones of foodgrains procured by it. In order to provide
easy access in deficit, remote and inaccessible areas, the FCI has a network of
storage depots strategically located all over India. These depots include Silos,
Godowns and an Indigenous method developed by FCI, called Cover and Plinth
FCI has 24.18 million tonnes (owned & hired) of storage capacity in over 1451
godowns all over India.
In order to reduce storage and transit losses of foodgrains and to bring additional
resources through Private Sectors participations., Govt. of India had announced a
National Policy on Handling Storage and Transportation of Foodgrains in June,
2004 for Bulk and conventional godowns.In the Ist phase,after a series of
deliberations, it was approved that total capacity of lakhs MT be created at the
identified based depots and feild depots through private sector participation on
Build-Own & Operate (BOO) Basis. RITES were appointed as consultants for
the project. A letter of acceptance of proposal of the project in two circuits has
been awarded to M/s. Advani Exports Ltd. , the lowest bidder to complete the
Project in 3 years from the date of execution of the service agreement.
2. Preservation
The Food Corporation of India has an extensive and scientific stock preservation
system. An on-going programme sees that both prophylactic and curative
treatment is done timely and adequately. Grain in storage is continuously
scientifically graded, fumigated and aerated by qualified trained and experienced
personnel.
Food Corporation of India's testing laboratories spread across the country for
effective monitoring of quality of foodgrains providing quality assurance as per
PFA leading improved satisfaction level in producers (farmers) and customers
(consumers).
The preservation of foodgrain starts, the minute it arrives in the godowns. The
bags themselves are kept on wooden crates/poly pallets to avoid moisture on
contact with the floor. Further till the bags are dispatched/issued, fumigation to
prevent infestation etc. of stocks is done on an average every 15 days with
MALATHION and once in three months with DELTAMETHRIN etc. on traces
of infestation, curative treatment is done with Al. PHOSPHIDE.
FCI's testing laboratories spread across the country (188) ensure that the stored
food grains retain their essential nutritional qualities as per FAQ.
3. Transportation
Ensuring accessibility to food in a country of India's size is a Herculean task. The
foodgrains are transported from the surplus States to the deficit States.
FCI moves about 250 Lakh tonnes of foodgrains over an average distance of 1500
Kms.
4. Distribution
The national objective of growth with social justice and progressive improvements
in the living standards of the population make it imperative to ensure that
foodgrain is made available at reasonable prices. Public Distribution of foodgrains
has always been an integral part of India’s overall food policy. It has been evolved
to reach the urban as well as the rural population in order to protect the consumers
from the fluctuating and escalating price syndrome. Continuous availability of
foodgrain is ensured through about 4.5 lakhs fair price shops spread throughout the
country.
TPDS
The Govt. of India introduced a scheme called Targeted Public Distribution
Scheme (TPDS) effective from June, 1997. The stocks are issued under this
scheme in the following two categories:-
2. Above Poverty Line ( APL) – Families which are not covered under
BPL are placed under this category. The stocks are issued at Central
Issue Price of Rs. 6.10 per Kg. of wheat and Rs. 8.30 per Kg. of rice.
1. Stock
The Central Pool stock are maintained by FCI and State Govts. and their agencies.
The total stock in Central Pool as on 31/07/2009 is 501.27(Figs. in Lakh MT).
Public Distribution System
PDS means distribution of essential commodities to a large number of people
through a network of FPS on a recurring basis. The commodities are Wheat,Rice,
Sugar, Kerosene . PDS evolved as a major instrument of the Government’s
economic policy for ensuring availability of foodgrains to the public at affordable
prices as well as for enhancing the food security for the poor. It is an important
constituent of the strategy for poverty eradication and is intended to serve as a
safety net for the poor whose number is more than 330 million and are
nutritionally at risk. PDS with a network of about 4.99 lakh Fair Price Shops (FPS)
is perhaps the largest distribution network of its type in the world.
PDS is operated under the joint responsibility of the Central and the State
Governments. The Central Government has taken the responsibility for
procurement, storage, transportation and bulk allocation of foodgrains, etc. The
responsibility for distributing the same to the consumers through the network of
Fair Price Shops (FPSs) rests with the State Governments. The operational
responsibilities including allocation within the State, identification of families
below poverty line, issue of ration cards, supervision and monitoring the
functioning of FPSs rest with the State Governments
Under TDPS, BPL and APL were divided according to 13 parameters. In its tenth
five-year plan (2002-2007) survey, BPL for rural areas was based on the degree of
deprivation in respect of 13 parameters, with scores from 0-4: landholding, type of
house, clothing, food security, sanitation, consumer durables, literacy status, labor
force, means of livelihood, status of children, type of indebtedness, reasons for
migrations, etc.
The Planning Commission fixed an upper limit of 3.26 lakh for rural BPL families
on the basis of simple survey. Accordingly families having less than 15 marks out
of maximum 52 marks have been classified as BPL and their number works out to
3.18 lakh. The survey was carried out in 2002 and thereafter but could not be
finalised due to a stay issued by the Supreme Court of India. The stay was vacated
in February 2006 and this survey was finalised and adopted in September 2006.
This survey formed the basis for benefits under government of India schemes. The
state governments are free to adopt any criteria/survey for state-level schemes.[1]
In its tenth five-year plan BPL for urban areas was based on degree of deprivation
in respect of seven parameters: roof, floor, water, sanitation, education level, type
of employment, and status of children in a house. A total of 1.25 lakh upper
families were identified as BPL in urban area in 2004. It has been implemented
since then.
Issues
Question 1
FCI was set up to act as an apex organization for equitable distribution of food
grains to the lower end of society. However, it ended up with losses and incurred
huge inventory costs. What were the flaws in the operations of FCI? How could it
be improved to achieve its objectives effectively?
Answer
Food Corporation of India was setup on 14th January 1965 under Food
Corporation Act 1964 with authorized capital of almost $600 million to
implement the national policy for price support operations, procurement, storage,
preservation, inter-state movement and distribution operations. But there was
many flaws in the system, some of them are:-
Restructuring of PDS
The following points need to be taken into consideration in order to make the
implementation of TPDS more effective:
Kerosene oil is also supplied through PDS and is intended for the poor but alarge
part is used in adultery with Diesel. Subsidies on this should be reduced.
The coverage of TPDS and food subsidy should be restricted to the BPL
population. For the APL population, which has the purchasing power to buy food,
the Government needs to only ensure the availability of food grains at a stable
price in the market. However, in the current situation, where the FCI has huge
surplus stocks of foodgrains, it may be necessary to continue supply of cereals
under PDS to the APL population at below economic cost as a temporary measure.
Ration cards should not be used by the administration as an identification card for
various purposes. That role should be assigned to multi-purpose identity cards.
Under the system of food stamps or food credit cards, the State Governments
could issue a subsidy entitlement card (SEC) instead of issuing ration cards. The
SEC should show, among other things, the number of members in a poor family
and their age and indicate their entitlement level for food stamps. Each family
would collect its monthly quota of food stamps from prescribed distribution
centres on showing their SEC. They could then use these food stamps at any food
supply shop to buy food grains (rice and wheat) at a price (Rs x) below the market
price. The retailer will then be reimbursed by the State Government. There would
be less corruption as FPS owners cannot lie that they have sold so and so much of
items.
Decentralization of Operations
One possibility that could be considered is that based on the net consumer subsidy
spent on providing food through the PDS, the Central budget should make a
provision for a national food subsidy. This subsidy can be distributed among the
states according to a prescribed formula based on the latest available data and
updated poverty ratios. It would then be left to individual State Governments to
determine the quantum of food subsidy based on the contribution they get from the
Centre and their own contribution. The Centre could also agree to enhance the
quantum of its contribution to compensate for any increase in prices. The new
system will also result in a more equitable distribution of the benefits of food
subsidy among different states. However, it needs to be ensured that the food
subsidy distributed by the Centre is utilized for the purpose for which it is meant
and not diverted for other purposes.
Operation of Buffer Stocks and FCI
The high level of market prices of wheat now prevailing in India are primarily due
to the rise in procurement prices over the past three years and taxes and charges on
cereals imposed by state governments. The difference between the economic cost
of FCI and the market price also contributes to the higher price. Notwithstanding
the criticisms against FCI, it has to be admitted that it does play an important role
in the country’s food economy. The contribution of the FCI would be enhanced if
there were greater competition in food trade from other public, co-operative and
private organisations. While the provision of food subsidy is an important element
of the food security system in India, the food procurement and buffer stock
operations play an equally important role. Since agricultural production tends to
fluctuate due to climatic factors, it is necessary to maintain an adequate level of
buffer stock to ensure stability in food grain prices
The FCI should gradually hand over its role of MSP-related procurement to
private trade. This requires a comprehensive reform of policies, rules and
procedures to strengthen the role of the modern private sector in the matter of
storage, distribution and processing of foodgrains. Various restrictions that inhibit
private initiatives in this regard need to be removed so that the private sector has
an incentive to make huge investment in grain handling operations and food
processing. There is urgent need to upgrade market infrastructure, cold storage
facilities, mandi facilities and roads, areas in which the private sector should be
encouraged to make productive investment.
Grain Bank Scheme
Grain banks were earlier launched in some ststes like Madhya Pradesh, under the
new scheme Grain banks can be set up in remote and isolated areas beyond the
reach of PDS and in regions where there is inadequate employment generation
such as in tribal and forest areas. In order to be successful, the grain bank scheme
has to be combined with a food for work programme, so as to ensure generation of
income, which is necessary in order to ensure repayment of borrowed grain by the
beneficiaries.
Question 2
Answer
With a network of more than 400,000 Fair Price Shops (FPS), the Public
Distribution System (PDS) in India is perhaps the largest distribution machinery of
its type in the world. PDS is said to distribute each year commodities worth more
than Rs 15,000 crore to about 16 crore families. This huge network can play a
more meaningful role if only the system is able to translate into micro level a
macro level self-sufficiency by ensuring availability of food grains for the poor
households.
The problem facing the country today is not one of shortage of foodgrains but of
managing the surplus. Ironically, even as the godowns of the FCI are overflowing,
stray cases of starvation deaths are still being reported. A civilised society in the
21st century cannot allow this to happen. Therefore, while there is need to produce
adequate food grains domestically, supplementing with imports whenever
required, it is also necessary to look at the food grain distribution network. The
Public Distribution System (PDS) in the country facilitates the supply of food
grains to the poor at a subsidised price. However, doubts have been raised about
the efficacy and cost-effectiveness of the PDS, especially in the light of the
growing food subsidy and food stocks. The PDS needs to be restructured and there
is a need to explore the possibility of introducing innovative ideas such as smart
cards, food credit/debit cards, food stamps and decentralized procurement, to
eliminate hunger and make food available to the poor wherever they may be in
cost-effective manner.There are two aspects to the paradox of overflowing
godowns and vulnerable sections of society not consuming adequate food. One is
the issue of having enough purchasing power or income to buy food and the other
is the access to food in terms of physical availability of food.
Recommendations
a. Items other than rice and wheat need to be excluded from the purview of TPDS.
Attempts to include more commodities under food subsidy cover should be
resisted.
c. Coarse grains are basic commodities purchased by the poor . These grains in
any case are available to the poor at low prices. There seems no additional need to
supply them through PDS and bring them under the cover of food subsidy.
d. Kerosene oil is also a commodity supplied through PDS and is intended for the
poor. But there occurs large scale illicit diversion of this item and benefits meant
for the poor are cornered by others. Subsidised kerosene is used for adulteration
with diesel. Subsidy on kerosene should be gradually phased out and alternate
avenues of marketing it needs to be explored.
e. The coverage of TPDS and food subsidy should be restricted to the population
below poverty line. For others who have the purchasing power, it would do merely
to ensure availability of grains at stable price in the market -- no need for food
subsidy to this population.
Conclusion
Despite the huge stock of food grains available in FCI godowns, stray cases of
hunger deaths are still being reported. The food distribution system, therefore,
needs to be reformed and made more efficient. The present system could be
replaced by a system of food stamps and eventually by a food credit card system.
The excess stocks of food grains that have accumulated with the Government is
partly a result of the high MSP which often exceeded the levels recommended by
the CACP. There is,
therefore, a need to adhere to the recommendations of the CACP in this regard.
The MSP should encourage diversification of agricultural production.
Bibliography
WEB
www.wikipedia.com
www.fciweb.nic.in
www.fcinez.com
www.fixya.com
www.books.google.co.in
www.scribd.com
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