Home / Politics / Policy /  Food Corporation of India in need of restructuring as corruption mars operations

New Delhi: India is closer to breaking up Food Corporation of India (FCI), an agency at the heart of the world’s largest public food distribution programme for the poor, as graft and waste leave 255 million people without enough to eat.

“Private companies should buy, store and distribute the grains as much as possible, with the government’s role shifting away from implementation to regulating and funding," according to Shanta Kumar, the head of the panel Prime Minister Narendra Modi set up to advise on the state-owned agency’s future.

“Times have changed," Kumar, 80, said in an interview in New Delhi on 30 October. “The government should only govern. If the private sector does the work, the work will be good. They will do it at a lower cost. This is my fundamental belief."

“The 50-year-old agency’s concessional wheat and rice fail to reach 40% of targeted beneficiaries because of issues such as theft and open-air storage that rots grains," Kumar said. US department of agriculture data show about one-fifth of India’s 1.2 billion people don’t get enough sustenance, even after the nation poured $64 billion in subsidies into FCI in the past seven years.

Modi’s changes since taking power in May include more market-based energy pricing, fewer foreign-investment curbs and steps toward ending the state’s grip on commercial coal mining.

Altering grain distribution would be among his most sensitive changes in a country with a history of famines.

Permitting private companies such as Cargill Inc. or billionaire Gautam Adani’s Adani Agri Logistics Ltd to profit from it also risks a political backlash in India, which has long struggled to curb food inflation.


“Changes are needed despite the sensitivities," said Kumar, a lawmaker for Modi’s Bharatiya Janata Party (BJP) and a former food minister. He aims to submit his recommendations next month.

Kumar said 370 labourers at the agency earned about 4,00,000 some months last year. Some got 4,45,000 in a month, he said. About 6,400 employees earned 50,000 to 100,000 rupees a month.

In another case, a worker marked as present for employment for two weeks was in jail at the time, he said.

“It’s loot," Kumar said. “It’s all going on due to connivance of officials."

FCI was set up under an act of parliament two decades after the Great Bengal Famine in 1943, which killed about 2 million people based on estimates in the book “Famine: A Short History" by Cormac Ó Gráda, an economics professor at University College Dublin.


The agency seeks to support the prices paid to farmers for produce, provide subsidized grains to the poor and maintain buffer stocks. India’s food security law enacted last year entitles about two-thirds of the population to cheap grains.

Food Corporation of India bought a record 72.2 million tonnes of grain in 2011-12, up from 42.7 million in 2001-02. Under the food security law, the poor are entitled to rice at 3 a kilogram, wheat at 2 and coarse grains at 1, under a monthly entitlement of five kilograms per person.

That helps restrain food inflation, which is being stoked by produce such as fruit, milk and vegetables. Consumer prices of food rose almost 8% in September from a year earlier.

“Any restructuring of the food agency should ensure that grains don’t add to price increases," said Professor Y.K. Alagh, chancellor at the Central University of Gujarat.

While FCI has contained costs for some, it’s also struggled to curb corruption and wastage.

About 255 million Indians are food insecure as they eat less than 2,100 calories daily, US department of agriculture data show, despite record recent harvests.

In 2012, a Bloomberg News investigation showed as much as $14.5 billion in food was looted by corrupt politicians and their criminal syndicates over a decade in Uttar Pradesh.

“Other potential options for restructuring include letting states buy the grain and using stated-owned Central Warehousing Corp. for storage and transportation, or cash welfare payments to the poor instead of handing out food directly," Kumar said.

“The system must improve," he said. “We have decided the destination. Now we have to decide which way to take." Bloomberg

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Recommended For You
Edit Profile
Get alerts on WhatsApp
Set Preferences My ReadsFeedbackRedeem a Gift CardLogout