study on Food Corporaion of India

8/9/2019 study on Food Corporaion of India

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A Case Study Report

On

Food Corporation of India

Submitted to:-Submitted by:-

Prof. R.K. Vijaya SarathyRupesh Kumar

Director, DSS an!a"ore CharuChandra

ajran! A!ar#a"

i$ash Prasad

Contents


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1. Introduction

1.1 Objective

1.2 SWOT analysis1.3 Organizational chart

2 . Functions of FI

3 . !ublic "istribution Syste#

$ . Issues

% . onclusion& . 'ibliogra(hy

Introduction

Food or(oration of India )*indi+भरतयखगनगम, 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 stora!e preser"ation inter#state mo"ement and distriution

operations%


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&t operates throu!h 5 zonal offices and a re!ional office in 'elhi% (ach year the

Food Corporation purchases rou!hly 15#)0 per cent of &ndia*s wheat output and 1)#

15 per cent of its rice output% +he losses suffered y FC& are reimursed y the

,nion !o"ernment to a"oid capital erosion and thus declared as a susidy in the

annual ud!et% &n )00- such food susidies were met y !o"ernment onds worth

almost $. illion%

1.1Objective

+he food corporation of &ndia was setup in order to fulfill followin! o/ecti"es of

the food policy#

1% (ffecti"e price support operations for safe!uardin! the interests of the

farmers

)% 'istriution of food !rains throu!hout the country for ulic 'istriution

2ystem

3% aintainin! satisfactory le"el of operational and uffer stocs of food !rains

to ensure ational Food 2ecurity

2ince its inception in 1965 ha"in! handled "arious situations of plenty and

scarcity FC& has successfully met the challen!e of mana!in! the comple7 tas of

pro"idin! food security for the nation% A stron! food security system which has

helped to sustain the hi!h !rowth rate and maintain re!ular supply of wheat and

rice ri!ht throu!h the year% +he efficiency with which FC& tacled one of the worst


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drou!hts of the century not only cemented its role as the premier or!anization in

char!e of food security in &ndia ut also rou!ht it accolades from international

or!anizations%

+oday it can tae credit for ha"in! contriuted a !reat deal in transformin! &ndia

from a chronically food deficit country to one that is self#sufficient

1.2 SWOT -nalysis


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2tren!ths

1% 8ound the year a"ailaility of

materials)% 2upport from central

!o"ernment3% 2tron! networ of distriution4% (7cellent 2tora!e ana!ement

eaness

1% :i!h re;uirement of worin!

capital)% &nade;uate automation with

re!ard to information

mana!ement3% Corruption at all le"el4% ast 'omestic maret)% &mpro"ement in distriution

channel3% 'i"ersify into nontraditional

commodities ? acti"ities%

+hreats

1% 8apid de"elopment)% 2hift in food haits3% (ntry of 8etail 2ector

1.3 organizational chart

or(orate Office


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onal Offices / % 0

egional Offices / 23 0

"istrict Offices / 1&% 0

"e(ots )incl. -!, / 1$0

With 1&$& offices4 FI is one of the largest net5or6ed organizations in India

F78TIO8S Of FI

1. !rocure#ent

!rocure#ent is the ac;uisition of !oods and?or ser"ices at the est possile total

cost of ownership in the ri!ht ;uality and ;uantity at the ri!ht time in the ri!ht place and from the ri!ht source for the direct enefit or use of corporations

indi"iduals or e"en !o"ernments !enerally "ia a contract or it can e the same

way selection for human resource % 2imple procurement may in"ol"e nothin! more

than repeat purchasin!% Comple7 procurement could in"ol"e findin! lon! term

partners @ or e"en *co#destiny* suppliers that mi!ht fundamentally commit one

or!anization to another%

+o nurture the reen 8e"olution the o"ernment of &ndia introduced the scheme

of minimum assured price of food !rains which are announced well efore the

commencement of the crop seasons after tain! into account the cost of


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production B inter#crop price parity maret prices and other rele"ant factors%

• +he Food Corporation of &ndia alon! with other o"ernment a!encies

pro"ides effecti"e price assurance for wheat paddy and coarse !rains%

• FC& and the 2tate o"t% a!encies in consultation with the concerned 2tate

o"ernments% estalish lar!e numer of purchase centers throu!hout the

state to facilitate purchase of food !rains

• Centers are selected in such a manner that the farmers are not re;uired to

co"er more than 10 ms%to rin! their produce to the nearest purchase

centers of ma/or procurin! states%

• rice support purchases are or!anized in more than 1)000 centers for wheat

and also more than 1)000 centers for paddy e"ery year in the immediate

post#har"est season%

• 2uch e7tensi"e and effecti"e price support operations ha"e resulted in

sustainin! the income of farmers o"er a period and in pro"idin! the re;uired

impetus for hi!her in"estment in a!riculture for impro"ed producti"ity%

• +o name a few states aout 8s%41000 millions for paddy and 43000

millions for wheat in un/a and 8s% 45000 millions for le"y rice in Andhra

radesh is paid to the farmers? millers durin! wheat ? rice procurement

season%

• &ndia today produces o"er )00 million tonnes of food !rains as a!ainst a


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mere 50 million tonnes in 1950%

• &n the last two decades food!rain procurement y o"ernment a!encies

ha"e witnessed a ;uantum /ump from 4 million tonnes to o"er )5 million

tonnes per annum%

• Food!rains are procured accordin! to the o"ernment # prescried ;uality

standards%

• (ach year the Food Corporation purchases rou!hly 15#)0 of &ndia*s wheat

production and 1)#15 of its rice production%

• +his helps to meet the commitments of the ulic 'istriution 2ystem and

for uildin! pipeline and uffer stoc%

+he 'eppt% of Food =& has recently formulated aforesaid policy for in"ol"in!

Central o"t% ,ndertain! ?2tate o"t% undertain!s?for the Central ool and

e7pandin! the scope of 2 operations in the areas where FC&?2tate a!encies

infrastructure for potential of procurement is wea and e7istin! o"t% A!encies

DFC& and 2tate A!enciesE are not ale to carry out 2 operations in such areas

where procurement e7ists to ensure that farmers are not denied the enefit of 2%

2. Storage

Another facet of the corporation is manifold acti"ities is to pro"ision of scientific

2tora!e for the millions of tones of food!rains procured y it% &n order to pro"ide

easy access in deficit remote and inaccessile areas the FC& has a networ of

stora!e depots strate!ically located all o"er &ndia% +hese depots include 2ilos


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odowns and an &ndi!enous method de"eloped y FC& called Co"er and linth

FC& has )4%1. million tonnes Downed hiredE of stora!e capacity in o"er 1451

!odowns all o"er &ndia%

&n order to reduce stora!e and transit losses of food!rains and to rin! additional

resources throu!h ri"ate 2ectors participations% o"t% of &ndia had announced a

ational olicy on :andlin! 2tora!e and +ransportation of Food!rains in June

)004 for Gul and con"entional !odowns%&n the &st phaseafter a series of

delierations it was appro"ed that total capacity of lahs + e created at the

identified ased depots and feild depots throu!h pri"ate sector participation on

'uild9O5n : O(erate )'OO, 'asis. 8&+(2 were appointed as consultants for

the pro/ect% A letter of acceptance of proposal of the pro/ect in two circuits has

een awarded to ?s% Ad"ani (7ports


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+he preser"ation of food!rain starts the minute it arri"es in the !odowns% +he

a!s themsel"es are ept on wooden crates?poly pallets to a"oid moisture on

contact with the floor% Further till the a!s are dispatched?issued fumi!ation to

pre"ent infestation etc% of stocs is done on an a"era!e e"ery 15 days with

A


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has always een an inte!ral part of &ndias o"erall food policy% &t has een e"ol"ed

to reach the uran as well as the rural population in order to protect the consumers

from the fluctuatin! and escalatin! price syndrome% Continuous a"ailaility of

food!rain is ensured throu!h aout 4%5 lahs fair price shops spread throu!hout the

country%

T!"S

+he o"t% of &ndia introduced a scheme called +ar!eted ulic 'istriution

2cheme D+'2E effecti"e from June 199-% +he stocs are issued under this

scheme in the followin! two cate!ories#

1% Gelow o"erty


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&. St

oc

6

+he Central ool stoc are maintained y FC& and 2tate o"ts% and their a!encies%

+he total stoc in Central ool as on 31?0-?)009 is 501%)-DFi!s% in


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responsiility for distriutin! the same to the consumers throu!h the networ of

Fair rice 2hops DF2sE rests with the 2tate o"ernments% +he operational

responsiilities includin! allocation within the 2tate identification of families

elow po"erty line issue of ration cards super"ision and monitorin! the

functionin! of F2s rest with the 2tate o"ernments

Targeted !ublic "istribution Syste#

&n June 199- the o"ernment of &ndia launched the +ar!eted ulic 'istriution

2ystem D+'2E with focus on the poor% ,nder the +'2 2tates are re;uired to

formulate and implement foolproof arran!ements for identification of the poor for

deli"er%y of food !rains and for its distriution in a transparent and accountale

manner at the F2 le"el%

,nder +'2 '!


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+his sur"ey formed the asis for enefits under !o"ernment of &ndia schemes% +he

state !o"ernments are free to adopt any criteria?sur"ey for state#le"el schemes%L1M

&n its tenth fi"e#year plan G< for uran areas was ased on de!ree of depri"ation

in respect of se"en parameters roof floor water sanitation education le"el type

of employment and status of children in a house% A total of 1%)5 lah upper

families were identified as G< in uran area in )004% &t has een implemented

since then%

Issues

http://en.wikipedia.org/wiki/Below_Poverty_Line_(India)#cite_note-pbplanning-0http://en.wikipedia.org/wiki/Roofhttp://en.wikipedia.org/wiki/Floorhttp://en.wikipedia.org/wiki/Below_Poverty_Line_(India)#cite_note-pbplanning-0http://en.wikipedia.org/wiki/Roofhttp://en.wikipedia.org/wiki/Floor


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Auestion 1

FC& was set up to act as an ape7 or!anization for e;uitale distriution of food!rains to the lower end of society% :owe"er it ended up with losses and incurred

hu!e in"entory costs% hat were the flaws in the operations of FC&N :ow could it

e impro"ed to achie"e its o/ecti"es effecti"elyN

-ns5er

Food Corporation of &ndia 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 stora!e preser"ation

inter#state mo"ement and distriution operations% Gut there was many flaws in the

system some of them are#

1% 8esistance from farmers to !i"e wheat to FC& ecause of hi!her prices

offered y pri"ate trade% Farmers* e7pectations with re!ard to price

ha"e to e met%

)%


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&ndia le"el cereal consumption in the rural areas declined from 15%3

! per capita per month in 19-)#-3 to 13%4 ! per capita per month in

1993#94%+he correspondin! decline in the uran areas was more

modest O from 11%3 ! to 10%6 ! o"er the same period% At the same

time consumption of mil and meat products as well as "e!etales

and fruits has increased% 2uch chan!es are a natural outcome of

economic de"elopment%4% For A< there was low difference etween the open maret prices and

'2 prices%5% +he enefit of food susidy was not accruin! to the rural masses ut

more to the farmers%6% :i!h procurement prices led to hi!h '2 prices main! it

unaffordale to poor so this increased the cost of maintenance of

in"entory%-% +he stoc were dama!ed y rodents which contriuted to the rottin!

away of stocs and a lar!e "olume was also wasted durin!

transportation throu!h mishandlin!%.% Corruption at all le"els ensured that a fair amount of food !rains did

not reach the desired se!ment of the population%9% 'ealers sell their ;uota of !rains to the rice dealers ecause they !ot a

hi!her price for the rice than they earned as commission y sellin! it

to ration card holders%

2ome of the measures that should e taen to achie"e the o/ecti"es of FC& are as

follows#

estructuring of !"S


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+he followin! points need to e taen into consideration in order to mae the

implementation of +'2 more effecti"e

Ierosene oil is also supplied throu!h '2 and is intended for the poor ut alar!e part is used in adultery with 'iesel% 2usidies on this should e reduced%

+he co"era!e of +'2 and food susidy should e restricted to the G<

population% For the A< population which has the purchasin! power to uy food

the o"ernment needs to only ensure the a"ailaility of food !rains at a stale

price in the maret% :owe"er in the current situation where the FC& has hu!e

surplus stocs of food!rains it may e necessary to continue supply of cereals

under '2 to the A< population at elow economic cost as a temporary measure%

8ation cards should not e used y the administration as an identification card for

"arious purposes% +hat role should e assi!ned to multi#purpose identity cards%

Food Sta#(s and Food redit ards

,nder the system of food stamps or food credit cards the 2tate o"ernments could

issue a susidy entitlement card D2(CE instead of issuin! ration cards% +he 2(C

should show amon! other thin!s the numer of memers in a poor family and

their a!e and indicate their entitlement le"el for food stamps. (ach family would

collect its monthly ;uota of food stamps from prescried distriution centres on

showin! their 2(C% +hey could then use these food stamps at any food supply shop

to uy food !rains Drice and wheatE at a price D8s 7E elow the maret price% +he

retailer will then e reimursed y the 2tate o"ernment% +here would e less

corruption as F2 owners cannot lie that they ha"e sold so and so much of items%


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"ecentralization of O(erations

=ne possiility that could e considered is that ased on the net consumer susidy

spent on pro"idin! food throu!h the '2 the Central ud!et should mae a

pro"ision for a national food susidy% +his susidy can e distriuted amon! the

states accordin! to a prescried formula ased on the latest a"ailale data and

updated po"erty ratios% &t would then e left to indi"idual 2tate o"ernments to

determine the ;uantum of food susidy ased on the contriution they !et from the

Centre and their own contriution% +he Centre could also a!ree to enhance the

;uantum of its contriution to compensate for any increase in prices% +he newsystem will also result in a more e;uitale distriution of the enefits of food

susidy amon! different states% :owe"er it needs to e ensured that the food

susidy distriuted y the Centre is utilized for the purpose for which it is meant

and not di"erted for other purposes%

O(eration of 'uffer Stoc6s and FI

+he hi!h le"el of maret prices of wheat now pre"ailin! in &ndia are primarily due

to the rise in procurement prices o"er the past three years and ta7es and char!es on

cereals imposed y state !o"ernments% +he difference etween the economic cost


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of FC& and the maret price also contriutes to the hi!her price% otwithstandin!

the criticisms a!ainst FC& it has to e admitted that it does play an important role

in the countrys food economy% +he contriution of the FC& would e enhanced if

there were !reater competition in food trade from other pulic co#operati"e and

pri"ate or!anisations% hile the pro"ision of food susidy is an important element

of the food security system in &ndia the food procurement and uffer stoc

operations play an e;ually important role% 2ince a!ricultural production tends to

fluctuate due to climatic factors it is necessary to maintain an ade;uate le"el of

uffer stoc to ensure staility in food !rain prices

!rivate Trade in Foodgrains

+he FC& should !radually hand o"er its role of 2#related procurement to pri"ate

trade% +his re;uires a comprehensi"e reform of policies rules and procedures to

stren!then the role of the modern pri"ate sector in the matter of stora!e

distriution and processin! of food!rains% >arious restrictions that inhiit pri"ate

initiati"es in this re!ard need to e remo"ed so that the pri"ate sector has an

incenti"e to mae hu!e in"estment in !rain handlin! operations and food

processin!% +here is ur!ent need to up!rade maret infrastructure cold stora!e

facilities mandi facilities and roads areas in which the pri"ate sector should e

encoura!ed to mae producti"e in"estment%

=rain 'an6 Sche#e

rain ans were earlier launched in some ststes lie adhya radesh under the

new scheme rain ans can e set up in remote and isolated areas eyond the


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reach of '2 and in re!ions where there is inade;uate employment !eneration

such as in trial and forest areas% &n order to e successful the !rain an scheme

has to e comined with a food for wor pro!ramme so as to ensure !eneration of

income which is necessary in order to ensure repayment of orrowed !rain y the

eneficiaries%

Auestion 2

FC& procured around )0 to )5 of the productions of wheat and rice howe"er

despite ha"in! an ade;uate ;uantity of food !rains it was unale to cater to the

needy masses effecti"ely% :ow was the pulic distriution system responsile for

this inefficiencyN 2u!!est some measure to impro"e the '2 in &ndia%

-ns5er

ith a networ of more than 400000 Fair rice 2hops DF2E the ulic

'istriution 2ystem D'2E in &ndia is perhaps the lar!est distriution machinery of

its type in the world% '2 is said to distriute each year commodities worth more

than 8s 15000 crore to aout 16 crore families% +his hu!e networ can play a

more meanin!ful role if only the system is ale to translate into micro le"el a

macro le"el self#sufficiency y ensurin! a"ailaility of food !rains for the poor

households%

+he prolem facin! the country today is not one of shorta!e of food!rains ut of

mana!in! the surplus% &ronically e"en as the !odowns of the FC& are o"erflowin!


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stray cases of star"ation deaths are still ein! reported% A ci"ilised society in the

)1st century cannot allow this to happen% +herefore while there is need to produce

ade;uate food !rains domestically supplementin! with imports whene"er re;uired

it is also necessary to loo at the food !rain distriution networ% +he ulic

'istriution 2ystem D'2E in the country facilitates the supply of food !rains to

the poor at a susidised price% :owe"er douts ha"e een raised aout the efficacy

and cost#effecti"eness of the '2 especially in the li!ht of the !rowin! food

susidy and food stocs% +he '2 needs to e restructured and there is a need to

e7plore the possiility of introducin! inno"ati"e ideas such as smart cards food

credit?deit cards food stamps and decentralized procurement to eliminate hun!er

and mae food a"ailale to the poor where"er they may e in cost#effecti"e

manner%+here are two aspects to the parado7 of o"erflowin! !odowns and

"ulnerale sections of society not consumin! ade;uate food% =ne is the issue of

ha"in! enou!h purchasin! power or income to uy food and the other is the access

to food in terms of physical a"ailaility of food%

'ealership and e"en memership of "i!ilance committees are seen as positions

where money can e made +he procedure to appoint them is hi!hly politicised

and mostly clients of


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resources which reportedly helps only contractors and corrupt !o"ernment staff

and eeps the poor and the needy away% =ne study claimed that each fair price

dealer has to QmaintainR on an a"era!e nine !o"ernment functionaries% &t is

si!nificant that the allocation to poorer states lie , Gihar and Assam !ot more

than douled after the switch#o"er to +'2 ut the off tae y the 2tates was poor

and y actual G< eneficiaries e"en poorer% +he scheme has not made any impact

on nutrition le"els in those 2tates%

eco##endations

a% &tems other than rice and wheat need to e e7cluded from the pur"iew of +'2%

Attempts to include more commodities under food susidy co"er should e

resisted%

% 2u!ar supply throu!h '2 draws well#to#do families to the system%

c% Coarse !rains are asic commodities purchased y the poor % +hese !rains in

any case are a"ailale to the poor at low prices% +here seems no additional need to

supply them throu!h '2 and rin! them under the co"er of food susidy%

d% Ierosene oil is also a commodity supplied throu!h '2 and is intended for the

poor% Gut there occurs lar!e scale illicit di"ersion of this item and enefits meant

for the poor are cornered y others% 2usidised erosene is used for adulteration

with diesel% 2usidy on erosene should e !radually phased out and alternate

a"enues of maretin! it needs to e e7plored%


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e% +he co"era!e of +'2 and food susidy should e restricted to the population

elow po"erty line% For others who ha"e the purchasin! power it would do merely

to ensure a"ailaility of !rains at stale price in the maret ## no need for food

susidy to this population%

f% 8ation cards ha"e tended to e used as &' cards to estalish peoples identity%

any !et ration cards issued only for this purpose%

onclusion

'espite the hu!e stoc of food !rains a"ailale in FC& !odowns stray cases of

hun!er deaths are still ein! reported% +he food distriution system therefore

needs to e reformed and made more efficient% +he present system could e

replaced y a system of food stamps and e"entually y a food credit card system%

+he e7cess stocs of food !rains that ha"e accumulated with the o"ernment is

partly a result of the hi!h 2 which often e7ceeded the le"els recommended y

the CAC% +here is

therefore a need to adhere to the recommendations of the CAC in this re!ard%

+he 2 should encoura!e di"ersification of a!ricultural production%

'ibliogra(hy

WB'

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