Shanta Kumar Panel Recommendations and Restructuring the FCI

India was the most successful beneficiary of the green revolution. The revolution made the country self-sufficient in terms of the buffer stocks and food requirement of the people which in its early years remain dependent on food aid. Food Corporation of India (FCI) was established to procure grain from farmers in order to encourage production, at a price fixed by CACP. Govt. also provides subsidies to agriculture inputs such as fertilizers, water supply and power. Govt. being a welfare state also provides subsidized food through fair price shop.

Now, since the country is having enough buffer stocks the old policies are putting pressure to the exchequer as also they are carried out in an extremely inefficient manner.

Inefficient system

Highly subsidized food grains often misutilised and illtargeted. Inefficient Fair price shops and the included leakages. An artificial scarcity is created in the fair price shops and the food grain is sold at higher price in the market. The role of intermediary and the added corruption. Nearly two-third of the population coverage under the NFSA is putting excessive pressure on the exchequer. The increased handling and transportation cost incurred by FCI adds further to the subsidies.

India can effect partial reforms by introducing DBTs (direct benefit transfers) in major urban areas and allowing private traders to purchase and supply grain to the FCI for the remaining requirements. Also there is a need to reform the National Food Security Act (NFSA).

Major recommendation of Shanta Kumar Panel

The Government had set up a special panel headed by former Food Minister Shanta Kumar to suggest changes in the FCI to accommodate the need of current times. Some of its relevant recommendations include:

  • Firstly, the FCI should be relieved from its responsibility of procurement in the grain surplus states such as Punjab, Haryana, MP, Chhattisgarh, Andhra Pradesh etc and should shift its focus to Eastern UP, Bihar, Assam and West Bengal. Procurement in the grain surplus states should be done directly by the state governments. What is the rationale behind focusing east is answered though.
  • Secondly, to check wasteful storage and transport costs, there should be a national warehousing system under a PPP model. Farmers should be able to deposit their produce in these warehouses and should be able to receive up to 80% of the MSP value of their produce from banks immediately; but later sell it at market price. It would reduce storage cost and wastage.
  • Thirdly, the bonuses given by the states should be made only state’s responsibility. Bonuses are paid by the state governments for political leverage and if it is made a responsibility of the states, it would avoid burden on exchequer of the central government. There should be a uniform 3% levy to be charged on FCI by the states which they can use to finance bonuses.
  • Fourthly, there is a need to shift the cash payments for inputs such as Fertilizers and rationalizing the urea price. Government needs to rationalize the absurd fertilizer pricing.
  • Fifthly, there is a need to amend the National Food Security Act and reduce the subsidized population to 40% instead of current 67%. The issue price should also be linked to the MSPs, except for the very poor.
  • Finally, the Fair Price Shops should be replaced with DBT at least in the urban centre.

All these suggestions would be helpful in arresting the leakages and the associated corrupt practices in the present food chain. Also more food for the poorest would better target the beneficiary.


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