CAG report blames FCI policies, storage gap for food grain loss

Report says utilization of storage capacity in various states was less than 75% in the majority of the months between 2006-12
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First Published: Tue, May 07 2013. 10 56 PM IST
The report says the government doesn’t follow a specific policy for fixing the minimum support price relative to the cost of production. Photo: Mint
The report says the government doesn’t follow a specific policy for fixing the minimum support price relative to the cost of production. Photo: Mint
Updated: Wed, May 08 2013. 12 49 AM IST
New Delhi: The national auditor highlighted the increasingly inadequate storage capacity of the Food Corporation of India (FCI), the government agency entrusted with food management and the procurement of food grains.
This storage gap and other policies of the FCI led to food spoiling in a nation where millions still go hungry everyday.
The Comptroller and Auditor General of India (CAG) said in its report that was tabled in Parliament on Tuesday that the storage gap widened to 331.85 lakh metric tonnes (LMT) from 59.95 LMT in the six-year period between 2007 and 2012.
The report said efforts to address the issue were inadequate.
“The storage gap in FCI against the central pool stock witnessed a steady increase during the period 2006-07 to 2011-12,” it said. “Against the storage gap of 332 LMT (March 2012), GoI (government of India)/FCI envisaged capacity addition of only 163 LMT during the six-year period under various augmentation programmes. Of this, only 34 LMT was completed (March 2012).”
Even as storage capacity remained inadequate, existing capacity was not completely utilized. The auditor observed that utilization of existing storage capacity in various states and union territories was less than 75% in the majority of the months between 2006-07 and 2011-12.
This amounted to unnecessary expenditure of Rs.376 crore during the period as FCI didn’t use the space it had in Punjab and Haryana, the auditor said.
Though there was a steady increase in the food stock procured by government agencies, it didn’t match allocation requirements under various government schemes.
“The average food grains procurement of 514 LMT during the period 2006-07 to 2011-12 was lower than the average allocation of 593 LMT made by the government to states under the targeted public distribution system (TPDS) and other welfare schemes (OWS),” the report said.
CAG highlighted the absence of specifications for maximum and manageable stock levels to be maintained in the central pool and of minimum buffer norms. It added that the existing buffer stock policy does not indicate which agency is primarily responsible for maintaining the minimum buffer stock level for the country as a whole, which adversely affects accountability and transparency in the management of food grains.
The report said the government doesn’t follow a specific policy for fixing the minimum support price (MSP) relative to the cost of production.
“It was observed that the margin of MSP fixed over the cost of production varied between 29% and 66% in case of wheat, and 14% and 60% in case of paddy during the period 2006-07 to 2011-12. Increase in MSP had a direct bearing on statutory changes levied on purchase of food grains by different state governments,” said the report, adding that this eventually resulted in the rising acquisition cost of food grains.
Ashok Gulati, chairman, Commission for Agricultural Costs and Prices (CACP), defended the CACP’s role in fixing the MSP.
“The CAG needs to first understand the mandate of CACP for fixing MSP,” Gulati said. “Cost of production is not the only factor to fix MSP. We have to fix MSP in a way that it incentivizes the use of technology to increase production and productivity. It is fixed in line with the emerging demand and supply patterns and also keeping in mind the impact on consumers.”
Abhijit Sen, member, Planning Commission, said, “If there are gaps in storage availability in some parts and under utilization of storage capacities in others, it is partly on account of FCI and partly on account railways’s inability to move food grains. A lot of the storage problems could be sorted if evacuation of food grains is done properly.”
Audit analysis revealed serious imbalances in storage capacity with a concentration in the states undertaking large procurement such as Punjab, Haryana, Andhra Pradesh, Uttar Pradesh and Chhattisgarh. These states account for 64% of the total storage capacity available with FCI.
The CAG report listed the poor condition of storage facilities, the failure to ensure the early disposal of food stocks and the storage of old crops as reasons for damage of food grains.
Carry-over charges paid to the state government rose from Rs.175 crore in 2006-07 to Rs.1,635 crore in 2011-12 because food grains were held beyond the prescribed time frame.
The report also alluded to bad planning in terms of the FCI’s inability to consider day-wise requirements, operational constraints and the failure to convey this to the railways resulting in a 6-17% shortage of railway rakes.
The national audit body also criticized the internal audit and physical verification conducted by FCI stating that it was largely inadequate and lacked independence. “Weak internal audit would expose FCI to the risk of non-compliance with rules, systems and procedures, inefficiencies and lack of control on operations,” the report warned.
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First Published: Tue, May 07 2013. 10 56 PM IST
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