Narendra Modi Government must revamp FCI to curb rising food prices

Narendra Modi during his poll campaigns had consistently criticised the UPA Government for letting the food grains rot in the granaries. The BJP's prime ministerial candidate had promised to revamp norms so that the food grains reach the poor instead of getting spoilt in the store houses. But the new government so far hasn't revealed what measures it has taken in this regard.

The new government had earlier said that it will give priority to restructuring of state-run FCI for improving the public distribution system (PDS).

In his budget speech Union Finance Minister Arun Jaitley said, "Government is committed to reforms in the food sector. Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS would be taken up on priority."

What is FCI?

The FCI was set up under the Food Corporation Act, 1964 to fulfill the objectives of the food policy, which are effective price support operations for safeguarding interests of farmers, distribution of foodgrains throughout the country for public distribution system and maintaining satisfactory level of operational and buffer stocks of foodgrains to ensure national food security.

FCI stocks doubled still food prices soaring:

As per a Mail Today report, the FCI's stocks of wheat and rice have risen to an unprecedented high of 610 lakh tonnes, which is nearly twice the amount required under safe buffer norms. Ironically, the country is still plagued with rising food inflation and poverty even as its granaries are falling short of space to store the bulk produced.

Nothing substantial done so far:

Stockpile of foodgrain has doubled still food prices are soaring

The BJP, in its election manifesto, had identified the FCI as a major hurdle in fight against inflation, but it has been over two months since the new government is in office still it has not yet clarified how it plans to "unbundle the FCI''. The issue is crucial as it will determine how the efficiently the government is going to utilise 115,000 crore worth of food subsidy.

Food inflation reached 9.5 per cent in May from 8.64 per cent in April pushing the Wholesale Price Index to a five- month high. Inflation dipped in June but the price of cereals continued to soar. Despite abundant stocks, price of rice increased by 10.25 per cent. Weak monsoon rains have also increased the risk of rising food prices.

Since country's Consumer Price Index gives 50 per cent weightage to food items it is too sensitive to the fluctuations in food price, says the report.

Who is responsible Centre or state?

The Centre blames state governments for the mess and vice versa. A senior food ministry official told Mail Today that since the FCI mainly looks after the storage and transport of food grain it is unbundled in a sense as the distribution of the food grains lies with the states. He further added that states must work hard to computerise their records to streamline the food distribution system and more grain reaches the consumers. But, the states have done little in this regard so far.

However, the states are passing the bucks over the Centre by accusing the latter of not releasing adequate stocks. There is also a lack of coordination within the corporation which is also to be blamed for sorry state.

The new government has spoken of a comfortable buffer with the FCI to supply foodgrain to the people if the monsoon fails. Unless the movement of these stocks is streamlined, however, the old problem of food inflation amid overflowing stocks will persist.

Challenges for Modi Government:

As per norms, about 319 lakh tonnes of foodgrain must be kept in the Central pool to meet the buffer stock as well as strategic reserve requirements. On July 1, these stocks stood at 610 lakh tonnes, which is almost double the normal limit. Hence, there is no space in the godowns to store the grains anymore which leads to rotting of foodgrain. There have been several reports in the past when foodgrains worth millions were spoilt in the godowns.

The FCI has failed to sell the foodgrain in the open market in order to boost domestic supply and check prices. In 2013- 14, the government had announced sale of 85 lakh tonnes of wheat but was able to sell only 58 lakh tonnes. This time as well the government has approved sale of 100 lakh tonnes of wheat from FCI stocks. Thus, ensuring sale of these proposed stocks will be a major challenge for the Modi government.

The slow transportation of foodgrain by the FCI is also a major problem. Senior railway officials feel that the FCI needs to expedite the loading and unloading of railway wagons in order to ensure quicker movement of foodgrain.

Time for Modi Government to deliver its promise:

Narendra Modi had always condemned Manmohan Singh Government for failing to come up with a proper mechanism and improve the efficiency of the godowns. The new dispensation must either introduce significant changes in the existing system or do away with the existing one. It is high time Narendra Modi government walks the talk.