FCI & PDS
The Food Corporation of India came into existence in 1965
under the Food Corporation’s Act of 1964. It came in a situation where food
production in India was extremely low and India was not self-dependent for food
grains. In 1964 -65, India’s wheat production was 12.26 million metric tonnes (MMT)
and India had to import 6.57 MMT of wheat that year. Imports of wheat amounted
to almost 54 percent of domestic production and on top of that India had a
extremely low total foreign exchange reserve of only US $524 million and the
price of wheat in the international market was $66.81/MT. That foreign exchange
reserve was only enough for the import of wheat at this year. India started
importing low quality PL480 from US at low cost, mostly as an aid. In order to
make the situation better in 1965, the Agricultural Prices Commission was rolled
out to give a boost to positive price policy, recommending minimum support
prices (MSPs) for basic staples, especially wheat and paddy (rice). The FCI was
to ensure that farmer’s get this MSP so that they are encouraged to increase the
production of basic staples.
Situation in India regarding food production and foreign
exchange is far better now as compare to the time when FCI was formed. During
the Financial Year 2012-13 (FY 2013) and 2013-14 (FY 2014), India has emerged as
the largest exporter of rice in the world, with more than 10 MMT of exports each
year. Total cereal exports (basically rice, wheat and corn) amounted to 22 MMT
in FY 2013 and another 21 MMT in FY 2014, thereby amounting to 43 MMT of cereal
exports in two years, which India has never done in its entire recorded history.
Grain Stocks with the public agencies is far more than the legislative
requirement. Public stock of grains and cereals is more than 80 MMT while the
legal requirement is only 32MMT. The foreign exchange reserves in the country
are safely beyond the 300$ Bln, and foreign reserve can easily handle any shock
in production and situation of imports.
As stated above The Food Corporation of India came into
existence at a time when India was going through many challenges. The Food
Corporation’s Act of 1964 provides some objectives which need to be fulfilled by
the Food corporation of India. These objectives of FCI are given below:
- provide effective price support operations to safeguard the interests of
- to distribute foodgrains through-out the country for public distribution
- to maintain satisfactory level of operational and buffer stocks of
foodgrains to ensure National Food Security.
Performance of FCI
First and foremost objective of FCI is to provide
effective price support to farmers to safeguard their interests. GoI
announces MSPs for 23 commodities, out of which FCI basically concentrates
on wheat and rice, either directly or through state agencies. Almost 90
percent of procurement of wheat and paddy today is being done through state
The primary channel where FCI unloads its procured grains
of wheat and rice is Public Distribution System (PDS). PDS has a long
history, and has expanded over years, and is currently also sought to be the
primary vehicle for implementing National Food Security Act (NFSA), 2013.
The total requirement for PDS and other welfare schemes is 61.2 MMT per
year. While states do much of the procurement of wheat and paddy, FCI’s role
comes in accepting rice, and transporting it from surplus states to deficit
ones in a timely and smooth manner so that ultimate beneficiaries of PDS can
avail of the benefits of subsidized food.
NFSA promises to give specified quantities of
rice/wheat/coarse cereals at Rs 3/2/1/Kg to 67 percent of population. The
quantity promised under the Act is 35kg/month for Antyodya households, and
5kg/per person for priority households. As the current average size of 14
the family in India is around 5, this will work to 25kg/household per month.
The total budgeted subsidy in FY 2015 is Rs 1.15 lakh crores, with pending
dues of more than Rs 50,000 crores.