Perrenial challenge of fci

The Perennial Challenge of Food Corporation of India
¹AKANKSHA JHA,2
TAMMANA SINGLA,3
ARUNDEV SHARMA
Prin. L.N. Welingkar Institute of Management Development & Research, Mumbai, PGDM - RBA, India
¹akankshajha.10@gmail.com, 2
tamannasingla27@gmail.com, 3
arundevd98@gmail.com
Abstract: India is an agro based Country with majority of its population depending upon the agricultural
activities majorly working in the primary sector. In financial year 2018, India witnessed the largest food grain
production of all time but also at the same time, loss incurred due to damage of food grains is also the highest.
The damage is particularly because of the inefficient storage facilities of FCI. On one hand there is an
inflationary trend in the prices of some of the essential grains depicting an excess demand and on the other
hand 30% of the population does not even have the access to one meal a day. Private sector participation in
agriculture warehousing sector has also increased making this segment much more competitive but a lot more
needs to be done. Food Logistics Chain in India, therefore, needs huge investment and effort in providing
proper storage facilities.
This paper has mainly two objectives
1. To find out the issues and challenges faced by FCI in agricultural warehousing sector.
2. To prepare the work around models to address the warehousing issue.
This paper reveals the core problem of supply-demand disequilibrium which is due to storage inefficiency. The
further requirement is to synthesize the status of knowledge and to provide directions in order to minimize the
post-harvest loss of grains in different regions of India.
Key words- Supply demand disequilibrium, Challenges, Issues, Work around models.
I.Introduction
The Food Corporation of India (FCI), set up on 14 January 1965, had its first District Office
at Thanjavur and headquarters at Chennai under the Food Corporations Act 1964 to apply the
following objectives of the National Food Policy:
1. Effective price support operations to safeguard the interests of the poor farmers
2. Effective use of Public Distribution System (PDS) to distribute food grains
countrywide.
3. Maintaining an adequate level of operational and buffer stocks of food grains to
ensure National Food Security
4. Regulation of market price of the food grains
It operates through 05 Zone offices and 24 Regional offices. Every year, the Food
Corporation of India purchases up to 15 to 20 per cent of India's wheat output and 12 to 15
per cent of its rice output. The purchases are made from the farmers at fixed rates declared by
the Govt. of India. This rate is called MSP (Minimum Support Price). There is no limit for
purchase in terms of volume; any quantity can be procured by FCI (Food Corporation of
India) provided the stock satisfies FAQ (Fair Average Quality) specifications with respect to
FCI.
I.I Organisational Structure

Food Corporation of India operates through its Depot headed by its Manager. Every district
has few depots to cater to the needs of the district's rural population. The depot reports to
District Office, headed by an Assistant General Manager, designated as Area Manager.
Assistant General Manager is also posted who is looking after the QC work. Under Area
Manager Control, there are Managers to deal with each and every section, who consolidate
the field level operations and through the area managers' authorization, they transmit the
necessary information and periodical statements to Regional Offices of their respective
regions. Under Managers are Assistant Grades Level -1, Level -2 and Level - 3 who help
managers in day-to-day operations of the organization.
II. Literature Review
The Problems Of Supply and Demand of Food Grains have been in Newspapers since a very
long period, for which many Solutions have been planned and Implemented but have
drastically failed. The problem created by bountiful harvest this year has been met by
harnessing every inch of storage space - old places, school buildings and abandoned airstrips.
From a record crop of 116 million tonnes, 17 million tonnes have been put by in these
storages. The Total Storage Count for Warehouses in 64000 and 900 registered warehouses
India is as Follows:-
Sr. No. Name of the
Organisation/Sector
Capacity
(Million tonnes)
1. Food Corporation of
India(FCI) 35.92
2. Central Warehousing
Corporation 9.91
3. State Warehousing
Corporation 27.08
4. State Civil Supplies
11.30
5. Cooperative Sector
5.07
6. Private Sector
57.75
Total 157.03
II.I Safe Storage

Wastage of food grains is not an uncommon eventuality because India has deficient storage
capacity and does not have a solid public distribution system so that the food grains reach the
poor. India has warehouses to store 16 million tons of food grains when it needs almost three
times that. The total storage capacity is 35.92 million tonnes. This leads to losses of 10-15 per
cent.
“Experts offer many solutions: increase allocation through PDS, give food grain through the
NREGA, offload the excess stock in the market, but don't feed it to the rats. A conservative
estimate would put the cost of food grains currently lying unprotected at a staggering’s
28,000 cores, enough to feed at least 2 core people for over one year
Sr. No Statement of Fact Website
1 The appointment of a new
committee, however, has a very
familiar tone to it. Just a couple of
elections ago, in 2004 the newly
elected UPA had asked consulting
firm McKinsey and Co. to suggest
ways to improve the functioning
of the FCI. This too was a
manifesto declaration by the UPA.
Even that was odd since; the
Bharatiya Janata Party-led
government had appointed the
Abhijit Sen led committee in 2002
to look into the long term grain
policy to address these very same
concerns of mismanagement.
https://www.livemint.com/Opinion/BjEzMjp
PpLhhdPhbDNSF5K/Why-reforming-the-
FCI-is-such-a-difficult-
task.html?fbclid=IwAR3gkaeBOzX2Pp72sd
EZeCF9z1wKNt4DQqBA7DiBbu_8bgFKM
O-bNaSd-jA
2 Apart from the wastage, the
excess procurement poses another
big problem – that of increasing
levels of subsidies
https://www.livemint.com/Opinion/BjEzMjp
PpLhhdPhbDNSF5K/Why-reforming-the-
FCI-is-such-a-difficult-
task.html?fbclid=IwAR3gkaeBOzX2Pp72sd
EZeCF9z1wKNt4DQqBA7DiBbu_8bgFKM
O-bNaSd-jA
3 Solutions like using Linear
programming to optimize storage
space and transportation have
been looked into but there seems
to be no solution to the problem in
the near future as the high cost of
land in the state discourages
private players from offering land
to FCI.
https://www.scribd.com/document/14282458
3/Other-Problems-Faced-by-
FCI?fbclid=IwAR2sk1AX-
Qu9P4Xvbe6UiV2AMeGCdtl4Y216U_ic-
8ftb18X_sy4lyk2hfI
4 The total storage capacity is 28
million tonnes. This leads to
losses of 10-15 per cent. Translate
this into value... that is 6 million
tonnes of grains damaged, unfit
8ftb18X_sy4lyk2hfI

for human consumption ... it
amounts to Rs 8,000 to Rs 10,000
crores annually. "Experts offer
many solutions: increase
allocation through PDS, give food
grain through the NREGA,
offload the excess stock in the
market, but don't feed it to the
rats.
5 A conservative estimate would
put the cost of food grains
currently lying unprotected at a
staggering Rs 28,000 corers,
enough to feed at least 2 crores
people for over one year
8ftb18X_sy4lyk2hfI
6 In 2011-16, CAG says, the
finance ministry released, on
average, just around two-thirds of
the funds FCI needed—though
CAG doesn’t say, this probably
helped the finance ministry show
lower subsidy numbers each year.
https://www.financialexpress.com/opinion/m
issing-the-real-food-corporation-of-india-
issue/798267/?fbclid=IwAR27HDZUkms6x
neLacV3VDiyJlkUe8srQUHRV1VUf80VZT
eEP_uYxF8Ctn8
7 For one, its procurement is limited
to wheat and rice in a handful of
states, as a result of which just 4-
5% of the country’s farmers sell
their produce to FCI. In Punjab, to
make things worse, FCI
procurement has encouraged
growing of too much of
wheat/rice and, as a result, a
dramatic fall in the state’s water-
table; at an all-India level
https://www.financialexpress.com/opinion/m
issing-the-real-food-corporation-of-india-
issue/798267/?fbclid=IwAR27HDZUkms6x
neLacV3VDiyJlkUe8srQUHRV1VUf80VZT
eEP_uYxF8Ctn8
II.II Summary of Table
Analysis has been done regarding the various Warehouse Problems for FCI
The total quantity of Production, Storage and Wastage of FCI.
III. Need for study
FCI and the state government warehousing companies have stored more than 244.38 million
tonnes of rice paddy by the beginning of the year. FCI has increased its warehousing facilities
by a one-third in the last six years to 81.48 million tonnes whereas central and state
warehousing corporation, along with private investors have built an addition of 480.53
million tons. The huge boost of storage facilities can lead to three major issues i.e.:

• Inadequate maintenance of storage facilities leading to destruction of stored
crops/grains.
• FCI’s inefficiency to use available storage space
• Unmonitored movement of grains.
With this research, we plan to find the root causes of the above-mentioned problems and
present our understandings as well as our findings.
IV. Research Methodology
The research is basically based on secondary data available in the electronic information
domain. Along with secondary, the research focuses on exploratory method of research
design. The paper tries to analyse the issues faced by FCI in their storage silos.
V. Discussion and Analysis
V.I Surplus food in India
Total of 57676.74 ton of food grains was wasted in India between 2013 and March 2018 It is
said that of the damaged stock, around 84% was rice and 14% wheat. Punjab accounted for
nearly 50% of the damages with Maharashtra accounting for 10% of the total loss. The
Honourable Supreme Court in its order, dated 27th July 2010 had observed, that: “In a
country where admittedly people are starving, it is a crime to waste even a single grain, all
out efforts must be made that not a single grain is wasted.”
V.II Annual crop cultivation in India
The agricultural sector in India accounts for about 17% of GDP and 10% of export earnings.
India’s arable land area of 159.7 million hectares (394.6 million acres) is the second largest in
the world.
Its gross irrigated crop area of 64.7 million hectares, largest in the world. It ranks among the
top three global producers of many crops like wheat, rice, pulses, cotton, peanuts, fruits and
vegetables. In spite of these achievements, the crop yields in India are still around just 30% to
60% of the best sustainable crop yields achievable in the farms of developed countries.
These are likely to be negated in the coming decades due to scientific and technologically
improved crop production measures which would increase the quantity of food grains
harvested and therefore the storage requirement would further increase. About 65-70% of the
total food grains produced in India is retained by farmers for their self-consumption or
meeting their other financial requirements. The food grains at farm level are stored in
traditional as well as in modern storage structures. Food grains are stored in bulk in these
storage structures, which are neither rodent proof nor moisture proof. There are estimates that

substantial quantity of food grains (about 6.0% to 10% of total production) are damaged in
these storage receptacles due to moisture, insects, rodents and fungi and also due to
transportation. After harvest, the grains are stored at three different levels. Producers or
farmer’s Level, Trader's or private rice millers Level, Urban Organizational Storage Level for
the central pool by FCI, Sate government agencies (SGAs).
V.III Food grains management
FCI is the only government agency entrusted with movement of food grains from the
procuring states to consuming states through a network of storage infrastructure owned or
hired by FCI in the whole of India. These food grains are distributed by the state governments
through TPDS and other welfare schemes (OWS). The food grains are also disposed of in the
open market through sale under open market sales scheme (OMSS) to contain inflationary
tendencies and generating storage space in the states.
While four months requirement of food grains for issue under TPDS and OWS are earmarked
as operational stocks, the surplus over that is treated as buffer stock and physically both
buffer and operational stocks are merged intone and are not distinguishable. For distribution
of food grains under TPDS and OWS, the GoI makes monthly allocation of food grains to the
states and UTs on the basis of their average annual off take of food grains from the Central
pool.
V.IV Storage management

Storage management is an important link in the whole system of purchase of food grains to
its distribution for consumption. At the trader’s level and urban organizational storage level,
the food grains are stored either in covered storage and open storage. In some cases, proper
plinth is not provided, and in the other cases, dunnage is not provided and food grain bags are
stacked directly on the ground causing huge damage of food grains. In some cases, the open
storage is done in unprotected open ground without compound wall or fencing, resulting in
lot of pilferage and damage by animals.
Unless adequate storage structures as per the prescribed specifications are made available, the
post-harvest storage loss cannot be curbed. Even though FCI is the main government agency
for the procurement and distribution of food grains held in the central pool, it is also
responsible for the management of food grains in the central pool held by State government
agencies (SGAs) and Decentralized procurement states (DCP). Since 2009, FCI has had to
depend on hired space made available from CWC, SWC, SGAs and private parties as its own
storage capacity was insufficient to accommodate the stock of food grains. As mentioned
earlier, the food grain stock is stored in covered silos Further, though the total food grains
stock in the central pool increased from 607.42 LMT to 843.03 LMT between 2011-12 and
2017-18, FCI increased its storage space through hiring or owned space only to the extent of
83.97 LMT (18%) which is not in-line with the increase in food grains stock level. Moreover,
FCI’s own storage capacity increased by a mere 46 LMT during the period 2011-12 to 2017-
18.
Because of not having enough owned storage space, FCI’s hired capacity increased by 64.9%
from 291.32 LMT in 2011-12 to 480.53 LMT in 2017-18 which led to payment of 1,119.03
Cr INR in 2017-18
Also since it could not take over stock of wheat procured by SGAs for the central pool within
the prescribed time frame of June each year, even till the end of March of the following
years, as much as 120.86 LMT of food grains remained un-lifted by FCI for which FCI had to
pay carry over charges to the SGAs to the tune of 1,635 Cr INR.
V.V Uneducated storing practices
Usually storage in open in the form of CAP is needed to be resorted to during peak
procurement seasons. The storage in the CAP should not be more than a year with at least one
turn-over of the stock every 6 months. Further, for proper aeration, the cover is to be removed
at least 2 to 3 times in a week.
Unfortunately, lot of stock is lying in the open where even the plinths are not available.
During procurement season, for want of adequate CAP storage facilities, stocks are simply
dumped /stacked on open spaces wherever feasible and much of this stock gets damaged
because of seepage of water from the ground.
V.VI Improper storage facilities

Utter disregard to safe and scientific storage practices have resulted in excessive damages to
food grains in the central pool maintained by SGAs in Punjab and Haryana. In addition,
failure to ensure early disposal of damaged stock led to blockage of storage space. The loss
due to damaged stock in the Punjab and Haryana region amounted to 21.168 Cr INR and
13.09 Cr INR respectively.
V.VII Rotting of crops
As per the extant policy of issue of food grains of FCI, the principle of First-In-First-Out
(FIFO) should be strictly followed with respect to the crop year as well as within crop year
during which the stocks are accepted. The CAG report of 2013 brought out the non-
adherence of this principle as a total of 125.99 LMT of food grains (including paddy)
pertaining to crop years 2008-09 to 2011-11 was lying in the central pool as on 31 March
2012.
V.VIII Utilization of existing storage capacity
Timely and proper planning of movement and distribution of food grains across pan India is a
pre-requisite for optimum capacity utilization of the existing capacity. Despite storage
constraints in FCI, the utilization of existing storage capacity in various states/UTs was less
than 75% in majority of the months during the period 2011-12 to 2017-18.
However, the capacity utilization may not be optimal due to reasons of sudden unanticipated
increase in offtake for a particular region or due to unanticipated decrease in procurement.
V.IX Non-utilization of existing storage capacity for surplus stock of wheat
With proper planning of timely move of stock from the major procuring states to the
consuming states, it is possible to make storage space available for the ensuing procurements
and save on the carry over charges that FCI is required to pay to the SGAs beyond the
prescribed time period.
However, based on the CAG report of 2013, the aggregate wheat stock available with the
SGAs of Punjab and Haryana at the end of each procurement season during 2006-07 to 2011-
12 was 609.83 LMT, against which the aggregate vacant storage space available in the major
wheat consuming states was 164.82 LMT.
In a gross misappropriation of silo storage facility available with FCI, out of a total of 4.62
LMT available with it, 3.52 LMT was lying unused for a period ranging from eight to 30
years20.
VI. Results
The Following are the Observations deduced in the Study About :-
1. Food Wastage in India despite having Surplus Production
2. Improper Storage Practices
3. Unfair Pricing For The Farmers
4. Inadequate Utilization Of Available Storages

VII. Developing Hypothesis
According to our studies and recommendation it is a Exploratory and inductive studies, where
we have recommended an online portal developed by Food Corporation India, thus no
hypothesis can be formed but the study can be utilised by future researchers to develop
hypothesis.
VIII. Conclusion and Recommendation:
FCI has tremendous potential in serving the nation if it caters to few existing problems. The
storage space in Northern India is huge but that remains unutilized for over 10 months in an
year and in other parts of India, there is considerable amount of lack of storage capacity. FCI
should do the needful to utilize the unused space efficiently in order to relieve of the stress
from other locations. This storing process, the warehousing should be privatised by opening
online portals wherein the farmer and the primary buyers which are companies like Reliance,
Big Basket, D mart, Big Bazaar would come under one umbrella and would buy directly from
the farmers. This would be a panacea for all the stakeholders i.e., farmers would be able to
get good money for their production and the end consumers would also get good quality
grains/crops at a decent price, it would be a win-win situation for everyone involved. For
running this portable a fixed amount of tax to be levied by FCI to run this portal. The grains
would go directly to the godowns/warehouses of these private players. There should be an
annual harvest prediction forecast so that these private players can get to know the amount
they would like to demand the stock and keep safe for the future. These players can then
figure out who’s going to sell in which locality and how.
IX. Limitations:
Due to time constraint, geographical constraint and complexities in buying a new land, we
have ignored the possibility of buying new lands to relieve off the stress. As generally a
tender has to be passed, a suitable location has to be found to make for a new
warehouse/location. Due to the paucity of area and time, we have restricted ourselves by not
looking into this aspect which could play a major role in tackling with this problem.

X. References
[1]. Agri logistics/warehousing opportunities and challenges by BB Pattanaik, Managing
Director, Central Warehousing Corporation
[2]. “FCI admits 1.94 LMT food grain wasted between 2005-13” – The Hindu, February 12,
2014 accessed on 30 September 2014
[3]. “Global food waste not, want not” – Institution of Mechanical Engineers, London,
January 2013 [4]. Poverty estimate based on mixed recall, data.gov.in, an open government
data platform accessed on 21 Jan 2015
[5]. Ramesh, A.(1999), Priorities and Constraints of Post-harvest Technology in India, In: Y.
Nawa, Post-harvestTechnology in Asia. Japan, International Research Centre for Agricultural
Sciences, Tokyo, 37p.
[6]. Richa Sharma (2014), Grain is in bulk storage – A status report, National Institute of
food technology entrepreneurship and management
[7]. Report of working group on warehousing development and regulation for the twelfth plan
period (2012-17), GoI, Planning Commission, October 2011
[8]. Report on the excess food grains in the godowns of the FCI and State civil supplies
corporations by Dr NC Saxena, Commissioner and Harsh Mander, Special Commissioner of
the Supreme Court in the case of PUCL Vs UOI & ORS. Writ petition (Civil) No.196 of
2001
[9]. Report of the Comptroller and Auditor General of India on Performance audit of storage
management and movement of food grains in FCI, 2013
[10]. Singh, P. K. (2010), a decentralized and holistic approach for grain management in
India, Current science, 99 (9):1179-1180.
[11] Report on Gross irrigated by India Stat
https://www.indiastat.com/agriculture-data/2/irrigation/145/stats.aspx
[12] Report on Grain loss percentage
http://shodhganga.inflibnet.ac.in/bitstream/10603/58275/13/13_chapter%206.pdf
[14] Report On FCI storage mgt and stats by FCI.
http://fci.gov.in/
[13] DNA Report On Food Wastage
https://www.dnaindia.com/india/report-72-percent-of-india-s-fruit-vegetable-produce-goes-
waste-1163946
[14] Report On Why Is Reforming The FCI Such a Difficult Task by live mint.
https://www.livemint.com/Opinion/BjEzMjpPpLhhdPhbDNSF5K/Why-reforming-the-FCI-
is-such-a-difficult-
task.html?fbclid=IwAR3gkaeBOzX2Pp72sdEZeCF9z1wKNt4DQqBA7DiBbu_8bgFKMO-
bNaSd-jA
[15] Report on Problems Faced By FCI

https://www.scribd.com/document/142824583/Other-Problems-Faced-by-
FCI?fbclid=IwAR2sk1AX-Qu9P4Xvbe6UiV2AMeGCdtl4Y216U_ic-8ftb18X_sy4lyk2hfI
7. The Financial Express Report On The Real Issue Food Corporation Of India.
https://www.financialexpress.com/opinion/missing-the-real-food-corporation-of-india-
issue/798267/?fbclid=IwAR27HDZUkms6xneLacV3VDiyJlkUe8srQUHRV1VUf80VZTeE
P_uYxF8Ctn8
8. TOI Report On FCI.
https://timesofindia.indiatimes.com/topic/FCI
9. Rs 2 lakh crore: This is what government owes the Food Corporation of India
https://www.downtoearth.org.in/news/agriculture/rs-2-lakh-crore-this-is-what-
government-owes-the-food-corporation-of-india-61476

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