Food Corporation of India (FCI)
This is a collection of articles archived for the excellence of their content. |
Contents |
Practices
Procurement, debts, stockpiles
2019, 2020
Reuters, December 29, 2020: The Times of India
How India's grain policies have stoked FCI's debt binge
NEW DELHI/MUMBAI: Food Corporation of India (FCI), the state grain procurement agency, buys rice and wheat from growers every season at guaranteed prices but farmers fear that those purchases may end under new agricultural laws at the centre of recent protests.
Farmers say the new laws will shut the regulated wholesale markets they depend on to take their produce. But FCI has racked up huge debts from the purchases required to meet its role as a buyer of last resort and to supply India's food welfare program.
How have FCI's purchases created massive grain stockpiles?
For years, the government, across different administrations, has ordered FCI to purchase grain in excess of its requirement to run the world's biggest food welfare programme as a buyer of last resort to placate farmers.
FCI's safety net encourages farmers, especially from states such as Punjab, Haryana, Madhya Pradesh and Chhattisgarh to grow tonnes of rice and wheat.
FCI supplies grain to more than 800 million beneficiaries entitled to receive 5 kg (11 pounds) of rice and wheat every month at Rs 3 (4.1 US cents) and Rs 2 a kg, respectively.
Robust output in many states and rising purchases by FCI have led to overflowing warehouses.
By the end of the crop year to June 2020, FCI's rice and wheat stocks surged to 97.27 million tonnes against its requirement of 41.12 million tonnes.
According to official estimates, the value of the extra grain lying at state warehouses comes to about $39 billion.
FCI cannot export the grain as its rice and wheat are more expensive than world prices. Also, World Trade Organization (WTO) rules restrict exports of grain meant for welfare programmes.
Why FCI's purchases have risen in the past two decades?
Punjab and Haryana were at the forefront of India's Green Revolution in the 1960s and have traditionally accounted for the bulk of FCI's purchases.
But in the past two decades farmers from other states such as Madhya Pradesh and Chhattisgarh have ramped up rice and wheat output, increasing FCI's purchases.
In 2020, Madhya Pradesh sold 12.94 million tonnes of wheat to FCI against 351,000 tonnes in 2000-01. FCI's purchase of rice from Chhattisgarh totalled 5.2 million tonnes this year, up from 857,000 tonnes two decades ago.
Why has FCI run up debts?
In the past decade, FCI's expenses have risen as the guaranteed price for common rice has climbed by 73% and for wheat by 64%.
However, the prices at which FCI sells rice and wheat to the food welfare programme have remained unchanged.
The government is supposed to pay the difference between FCI's procurement prices and sales prices. But for the past few years, it has not fully compensated FCI, forcing it to borrow every year. FCI's total debt has ballooned to Rs 3.81 lakh crore ($51.83 billion).
For the current fiscal year to March 2021, the government earmarked Rs 1.15 lakh crore in food subsidies, but FCI is likely to spend about Rs 2.33 lakh crore, partly because of free grain distributions during the coronavirus lockdown, stretching its debt further.
Malpractices
FCI loaders’ alleged salaries: SC concerned
The Times of India Jan 09 2016
Dhananjay Mahapatra
The Supreme Court on Friday said there was something “seriously wrong“ with the Food Corporation of India where 370 departmental labourers were paid Rs 4.5 lakh a month, a salary that was much more than that of the President of India.
“Labourers in FCI have an aggressive past. Officers have been murdered. There is a clique that is operating there and FCI has become a hen that lays golden eggs for them. The FCI is literally held to ransom by the labourers and their unions and there is something seriously wrong with it,“ said a bench of Chief Justice T S Thakur and Justices A K Sikri and R Banumathi.
The bench was referring to a report of the high-level committee comprising experts, IIM graduates and economists, which said that the Rs 1,800 crore salary bill for labourers in FCI was unacceptable. It pointed out that apart from these 370, there were other departmental labourers who earned a monthly average salary of Rs 80,000 and that in contrast, the contractual labourers doing the same job earned Rs 10,000 per month.
Appearing for FCI, advocates Y P Rao and Vikas Singh Jangra told the court that the average cost per month per worker in the corporation was nearly Rs 80,000. The bench said: “They are just loading and unloading sacks of foodgrain. How are they getting paid so much when the contractual labour for the same job gets paid Rs 10,000? This means there must be many who must be subletting the work to contractual labourers and drawing salary without doing anything.“
On the basis of a November 15, 2014 story in TOI narrating these facts, the Bombay high court had taken suo motu cognizance of the “loot“ that was going on in FCI and passed several directions, which included: reducing the mindboggling incentive scheme prevalent in FCI; making the labourers job transferable, abolition of depots and abolish the system of departmental labourers in phases.
The FCI Workers' Union through Amit Sibal had challenged the HC order. Instead of getting any sympathy , the counsel met with a barrage of questions deriding the system of wages prevalent in FCI.
CJI Thakur asked solicitor general Ranjit Kumar whether the Centre has taken any decision on the directions passed by the Bombay HC, which had given a month to act on its November 26 judgment. The SG told the court that he would get back with the government's response in 10 days.
The bench said: “If you do not listen to the recommendations of the high-level committee appointed by you and set FCI right, we will appoint a very high-level committee headed by a judge to do the needful.Grains are wasted in FCI for years because of lack of storage facility. Rampant corruption is ruining the corporation.“
The committee report was a tale of abuse of funds, inefficiency , and reluctance on the part of the authorities to act tough against vested interests.It said so-called “labour gangs“ at FCI have flourished under a system where state funds are used to pay them eyebrow-raising wages.
In August 2014, 370 workers received more than Rs 4 lakh in wages, incentives, arrears and overtime allowance. Another 386 workers received between Rs 2 lakh and 2.50 lakh in the same month.
Proxy Labourers
Against rule of 105 bags a day, FCI `baahubalis' handled 1,776, The Times of India, Aug 04 2017
CAG Red-Flags Presence Of Proxy Labourers
A Comptroller and Auditor General (CAG) report on the performance of the Food Corporation of India (FCI) has found that labourers at its various depots were handling 998 to 1,776 bags per day , unusually high against all prescribed norms, indicating “proxy labourers“ being paid by the government agency .
Against the prescribed norm of handling 105 bags a day, the labourers were actually handling 110 to 197 bags every hour, continuously for nine hours a day. But, despite this, the FCI lost a substantial quantity of its foodgrains lying in open areas--about 4.72 lakh tonnes of wheat valued at Rs 700 crore deterio rated and was declared unfit for public distribution during 2007-12.
If the baggage carrying capacity of these workers is analysed, it shows a remarkable output: a labourer handling 998 baggage a day was actually loadingunloading more than 110 bags every hour, continuously for nine hours. Similarly, the labourer handling 1,776 bags a day was actually loadingunloading 197 bags every hour, continuously for nine hours.
The report, to be tabled in Parliament, has raised a red flag on the payments of more than Rs 230 crore towards unusual labour cost. “The labour at various depots were found as per records to be handling very high number of bags per day ranging from 998 to 1,776 as against the norm of 105 bags per day,“ the auditor has observed.
The exorbitant incentives being paid to these labourers if investigated could lead to unfolding of a bigger scam in the FCI. The auditor has highlighted non rationalisation of surplus departmental labour, deployment of costlier labour at depots and non-pooling of labour as some of the reasons behind this excessive practice.
The federal auditor has recommended action for elimination of proxy labour by ensuring proper documentation of prescribed details in the booking-cum-output slips, expediting installation of biometric attendance system and CCTV installations at FCI depots.
The report also highlighted the need for incorporating automated red flag indicators in financial accounting package for suspected abnormally high claims towards incentives and over time allowance.
Subsidy burden bleeding FCI: CAG
Subsidy burden bleeding FCI: CAG, August 4, 2017: The Times of India
In a soon to be released report, the CAG has raised concern on the government's partial payment of subsidy to the Food Corporation of India (FCI) that has resulted in the agency incurring interest burden amounting to Rs 30,700 crore over the last five years.
Expenditure on subsidies not entirely accounted for in the government accounts gives a wrong picture on the Centre's fiscal and revenue health, an issue that also raises doubts on the accuracy of the finance account.
The report, which is to be tabled in both the Houses of Parliament this session, said that on an average the govern ment had been paying only 67% of the total subsidy bills raised by FCI over the last five years. The government's annual food bills to the extent of 33% have not been accounted for in its each year's subsidy expenditure account.
The auditor has said the failure to pay the full subsidy had resulted in FCI borrowing from other sources, which are costlier options compared to the funds made available through budgetary allocations. The FCI has compensated the shortfall through cash-credit method and short term loans resulting in heavy interest burden of Rs 30,701crore during 2011-16.
The scrutiny of the FCI's finances has revealed that an amount of Rs 2,897 crore was outstanding as on March 2016 from various ministries and state governments. The auditor has suggested that the finance ministry must make full allocation to the ministry of consumer affairs and public distribution towards the food subsidy component to be given to FCI.
The auditor has also asked the FCI to approach the ministry of consumer affairs to obtain guarantee for issue of bonds so as to have access to cheaper source of finance. It has also asked the corporation to seek approval of the government to utilise short term loans before exhausting the cash credit limit.
The failure of the FCI to conduct efficiency analysis after every two quarters as mandated also came in for criticism where the auditor said that no study was conducted of the monthly cash credit used by FCI on the subsidy released by the government.
