Shanta Kumar Committee Recommendations

Issues with Food Corporation of India

India has come a long way from the time it was struggling with food shortages way back in 1960. Now instead of shortages India faces a problem of plenty and lack of storage facilities.

• FCI which was entrusted the responsibility of providing benefits to farmers at the grass-root level has not been able to shoulder the same effectively leaving aside a few states.
• Also, there have many glaring leakages in the Targeted Public Distribution Scheme.
• Further on, the organization has not been to manage its expenses well and has high operational costs and has to pay a hefty sum as interest. The diseconomies of scale have seeped-in. The organisation needs to be more lean and expand to non-traditional food-grain producing states for procurement.
• Elections are time when government gives incentive to farmers by raising the MSP. The price recommendations are given by Commission for Agricultural Costs and Prices, but is implemented by the government. The FCI, has been ensuring a smooth procurement pattern irrespective of MSP. This has led to huge rotting stocks of food-grains due to lack of storage facilities. Such huge stocks pose the problem of subsidy (Subsidy is the difference between economic cost of procuring, storing and distributing food grains). The sales at issue prices (determined by government are monitored by FCI. Thus, FCI has little or basically no control over either MSP or the Issue Price.

Shanta Kumar High Level Committee

The Central government in August 2-14 set-up a high level committee to study the core issues of FCI and make suitable recommendations to restructure FCI to improve its operational efficiency and financial management.

Key Recommendations of  Shanta Kumar Committee

1. FCI should transfer all procurement operations atleast to states who have considerable experience and infrastructure. These are Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab. FCI should instead procure only the surplus which is contributed to the Central pool by these states to support farmers in distress due to small landholdings and thus have to settle with a sale price far below the MSP in states like UP, Bihar, West Bengal, Assam. In addition, it should channelize this surplus for various subsidy acts like NFSA.
2. There should be uniformity and rationality in procurement operations by implementing 3 points:
3. The Centre will not accept any additional/surplus food-grains from states who give subsidy/bonus to farmers above the MSP. Such states will have to bear all costs (storage and distribution) themselves.
4. Uniform statutory levies among all states around 3 or 4% of MSP.
5. Stringent quality checks at the when accepting food grains for Central pool.
6. Encourage and speeden the Negotiable Warehouse Receipt System (NWRS) under which farmers can park their produce in registered warehouses and even get upto 80% advance from banks @ MSP. This will considerably reduce the storage costs and responsibility of the government.
7. Prioritise pulses and oilseeds and their MSP should be taken seriously and implemented uniformly across the country. MSP has been largely operational in wheat and rice and that too only in some select states, while the other important food-grains have suffered in their backdrop. Also, Government should streamline trade policy and MSP.
8. NFSA should be revised with no subsidy to be offered to states which don’t have computerised the list of beneficiaries ( which can be verified) and have not set up vigilance committees to check pilferage. This has been done to plug leakages in the PDS whose range in some states has gone upto 70%.
9. The coverage of NFSA should be brought down from 67% population to 40%. This will comfortably cover the BPL population and even some above that. Also, the targeted beneficiaries must be given 6 months ration in advance, right after the procurement season draws to a close. This will bring down storage overheads borne by government and procurement agencies.
10. Another landmark recommendation is the introduction of cash transfers in PDS in cities with a population of over 1 million. These can be done via Aadhaar numbers of Pradhan Mantri Jan Dhan Yojana.
11. FCI should outsource its food-grain stocking operations to agencies like CWC, SWC, private warehouses etc.
12. Direct Cash Transfers to farmers (@ INR 7000/ha) to help them raise productivity and overall food production in the country. This will empower them and reduce their dependence on money-lenders.
13. Complete end-to-end computerisation of the food management system in India.

Thus, though the recommendations may seem to plug-in many loopholes but such massive restructuring will not bear much fruit as the main issue of food pricing and storage are not done by suo moto decisions of FCI. Also, with NFSA in place it is highly unlikely that government can roll-back subsidies for the time-being. MSP has brought in obligations for better storage facilities. The underlying question is thus, how far these recommendations will be adopted, in face of stiff reluctance from some states.