Equity Infusion For Food Corporation of India

Syllabus: GS3/ Economy

Context

• The Cabinet Committee on Economic Affairs (CCEA) has approved an infusion of equity of Rs.10,700 crore for working capital in FY 2024-25 in Food Corporation of India (FCI).

Food Corporation of India

• The Food Corporation of India was set up under the Food Corporations Act 1964, with authorized capital of Rs. 100 Crores and equity of Rs. 4 Crores.
• Objectives of the FCI;
  • Effective price support operations for safeguarding the interests of the farmers.
  • Distribution of foodgrains throughout the country for a public distribution system.
  • Strategic food grain stocks: Maintaining satisfactory level of operational and buffer stocks of foodgrains to ensure National Food Security.

Challenges with FCI

• Storage Issues: Insufficient facilities lead to wastage.
• High Costs: Expensive procurement, storage, and distribution.
• Inefficiencies: Delays, corruption, and leakage in supply chains.
• Limited Crop Focus: Over-focus on rice and wheat impacts crop diversity.
• Financial Strain: Heavy subsidies create fiscal pressure.

Measures to Boost Effectiveness of FCI

The Standing Committee on Food, Consumer Affairs, and Public Distribution recommended: 

• Decentralized Procurement: Encourage more states to adopt the Decentralized Procurement Scheme to reduce transportation costs and improve local distribution. 
• Infrastructure Development: Assist state governments in creating adequate infrastructure for effective procurement and storage of food grains. 

• Utilization of Storage Capacity: Maximize the use of FCI-owned storage facilities before resorting to hiring additional storage to minimize costs. 
• Construction of Godowns: Expedite the construction of godowns, especially in northeastern states, Jammu and Kashmir, Andaman and Nicobar Islands, and Lakshadweep, to enhance storage capacity. 
• Performance Evaluation: Conduct regular performance evaluations of the Decentralized Procurement Scheme to identify and address challenges.

Source: PIB