17/10/2019 - Agriculture | Mainstorming

IAS Parliament 5 years

KEY POINTS

Reasons

· The growing indebtedness of the Food Corporation of India (FCI), which bodes ill for its financial health, is essentially the consequence of recurrent under-budgeting of food subsidy by the Union government.

· Excessive stockholding and flawed grain procurement and distribution policies. Inadequate provisions for food subsidy in successive Union Budgets in the past few years have been compelling the FCI to borrow from the National Small Savings Fund and other sources.

· Open-ended grain procurement at the minimum support prices (MSPs) has, on the other hand, caused excessive accumulation of food stocks, requiring needless expenses on their upkeep.

· Furthermore, the annual increase in the procurement prices without a simultaneous increase in the sale prices has pushed up subsidy on the food grains supplied under the national food security law.

Reforms for better functioning

· Shanta Kumar committee in its report in 2015 suggested that the FCI should hand over all procurement operations for wheat and rice to the states, which have developed adequate infrastructure for this purpose.

· This would allow it to concentrate more on the areas not covered under any price support mechanism, resulting in widespread distress sales.

· The FCI still picks up grains largely from the same set of states where it has been doing so in the past.

· This has distorted the cropping pattern, tilting it in favour of cereals at the cost of other food crops that are in short supply and often face price volatility.

· The Shanta Kumar committee had also called for carrying out labour reforms in the FCI to bring down the grain handling costs.

· This recommendation has been implemented only partially and needs to be taken forward without delay.

· Another critical recommendation pertains to amending the food security law. The committee had favoured a reduction in the population coverage but an increase in the monthly food grain quota of the beneficiaries to make this law truly helpful for the poor.

· Efficient logistics and optimal allocation of food grains under various schemes by the government is essential for better food management system in India.