FCI & PDS: Civil Services Mentor Magazine - May - 2015


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 the farmers;
  • to distribute foodgrains through-out the country for public distribution system(PDS);
  • 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 agencies.

  • 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.

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