Shanta Kumar Committee Report – FCI restructuring:

Government of India had  set up a High Level Committee (HLC) in August 2014 with Shri Shanta Kumar as the Chairman to suggest restructuring or unbundling of FCI with a view to improve its operational efficiency and financial management.  HLC was also asked to suggest measures for overall improvement in management of foodgrains by FCI; to suggest reorienting the role and functions of FCI in MSP operations, storage and distribution of foodgrains and food security systems of the country; and to suggest cost effective models for storage and movement of grains and integration of supply chain of foodgrains in the country.

Key Recommendations of  Shanta Kumar Committee Report:

  1. FCI should transfer all procurement operations atleast to states who have considerable experience and infrastructure. These are Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab.  FCI will accept only the surplus (after deducting the needs of the states under NFSA) from these state governments (not millers) to be moved to deficit states. FCI should move on to help those states where farmers suffer from distress sales at prices much below MSP, and which are dominated by small holdings, like Eastern Uttar Pradesh, Bihar, West Bengal, Assam etc. This is the belt from where second green revolution is expected, and where FCI needs to be pro-active, mobilizing state and other agencies to provide benefits of MSP and procurement to larger number of farmers, especially small and marginal ones.
  2. The Centre will not accept any additional/surplus food-grains from states who give subsidy/bonus to farmers above the MSP. Such states will have to bear all costs (storage and distribution) themselves.
  3. There should be an uniform statutory levies among all states around 3 or 4% of MSP.
  4. Stringent quality checks should be made at the when accepting food grains for Central pool.
  5. Encourage and speeden the Negotiable Warehouse Receipt System (NWRS) under which farmers can park their produce in registered warehouses and even get upto 80% advance from banks @ MSP. This will considerably reduce the storage costs and responsibility of the government.
  6. Prioritise pulses and oilseeds and their MSP should be taken seriously and implemented uniformly across the country. MSP has been largely operational in wheat and rice and that too only in some select states, while the other important food-grains have suffered in their backdrop.
  7. Covered and plinth (CAP) storage should be gradually phased out with no grain stocks remaining in CAP for more than 3 months. Silo bag technology and conventional storages where ever possible should replace CAP.
  8. The coverage of National Food Security Act (NFSA) should be brought down from 67% population to 40%. This will comfortably cover the BPL population and even some above that. 5kg grain per person to priority households is actually making BPL households worse off, who used to get 7kg/person under the TPDS. So, HLC recommends that they be given 7kg/person. On central issue prices, HLC recommends while Antyodya households can be given grains at Rs3/2/1/kg for the time being, but pricing for priority households must be linked to MSP, say 50 percent of MSP. Else, HLC feels that this NFSA will put undue financial burden on the exchequer, and investments in agriculture and food space may suffer.
  9. Also, the targeted beneficiaries must be given 6 months ration in advance, right after the procurement season draws to a close. This will bring down storage overheads borne by government and procurement agencies.
  10. NFSA should be revised with no subsidy to be offered to states which don’t have computerised the list of beneficiaries ( which can be verified) and have not set up vigilance committees to check pilferage. This has been done to plug leakages in the PDS whose range in some states has gone upto 70%.
  11. The introduction of Direct cash transfers in PDS in cities with a population of over 1 million. These can be done via Aadhaar numbers of Pradhan Mantri Jan Dhan Yojana.
  12. FCI should outsource its food-grain stocking operations to agencies like CWC, SWC, private warehouses etc.
  13. Direct Cash Transfers to farmers (@ INR 7000/ha) to help them raise productivity and overall food production in the country. This will empower them and reduce their dependence on money-lenders.
  14. Complete end-to-end computerisation of the food management system in India.

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