FCI rejig: Panel for direct cash transfer of food subsidy

After oil, a cut in food subsidy is on the anvil as a high-level panel Wednesday suggested giving cash to beneficiaries and shifting rice and wheat procurement to states that do not have provisions for administered purchase price.

New Delhi: After oil, a cut in food subsidy is on the anvil as a high-level panel Wednesday suggested giving cash to beneficiaries and shifting rice and wheat procurement to states that do not have provisions for administered purchase price.

Food Corporation of India (FCI), the Union government's nodal agency for procurement and distribution of foodgrains, should focus on eastern states, leaving bulk purchase to state agencies in Punjab, Haryana, Andhra Pradesh, Chhattisgarh, Madhya Pradesh and Odisha, the panel suggested in its report submitted to Prime Minister Narendra Modi.

Also, it wants grain storage to be outsourced to private and government agencies like state-owned Central Warehousing Corporation (CWC) and state warehousing corporations.

The eight-member committee, which was set up in August 2014 under the chairmanship of BJP MP Shanta Kumar, to recommend a complete overhaul of the way the mammoth organisation, FCI, functions.

"The Prime Minister has asked the Department of Food and Public Distribution to expeditiously give its comments on the report so that it can be implemented in a time-bound manner," an official statement said.

Ashok Gulati, a member of this panel, made presentation on various recommendations. Food Minister Ram Vilas Paswan was present on the occasion.

According to highly-placed sources, the panel has suggested that "FCI should hand over procurement to six states like Punjab, Haryana, Andhra Pradesh, Chhattisgarh and Odisha for wheat and rice."

The committee recommended that FCI procurement should focus on eastern belt, where farmers do not get MSP. The Centre has also launched a scheme to achieve the second green revolution in the easter states, including Bihar, Jharkhand, West Bengal and Assam.

With states imposing higher mandi taxes on wheat and rice, the panel favoured uniform tax of minimum 3 percent and maximum 4 percent and the same to be included in the minimum support price (MSP). In Punjab, this tax rate now on wheat and rice is 14.5 percent.

Finance Minister Arun Jaitely had allocated Rs 1.15 lakh crore for food subsidy this year, of which Rs 92,000 crore is for FCI. In petroleum subsidy, government has already started direct benefit transfer. Direct cash transfer is expected to plug leakage and reduce subsidy bill.

To strengthen distribution of foodgrains, the panel suggested "end-to-end computerisation" and setting up of a vigilance committee. At present, the leakage in PDS is estimated at 13.7 per cent.

The panel has recommended "giving cash transfer in 52 cities having 1 million or more population in two years" and also asked the government to give deficit states the option of either supplying grain or cash transfer.

For improvement in foodgrains storage, the panel has suggested outsourcing of stocking to Central Warehousing Corporation (CWC), State Warehousing Corporations (SWCs) and private organisations.

"FCI will manage but stocks would maintained by these organsiations," a source said, adding that the scaling up of warehousing receipts system has also been prescribed.

The panel called for encouraging private investment in logistics. "Set up silos in next two-three years, encourage bulk handling of foodgrains through grain trains."

The committee has finalised the report in five months. Initially, it was asked to submit the recommendation in three months, but it sought two-month extension.

Other members of the committee include FCI Chairman-cum- Managing Director C Viswanath and electronic and IT secretary Ram Sewak Sharma.

The chief secretaries of Punjab and Chhattisgarh, besides academicians G Raghuram and Gunmadi Nancharaiah from the Indian Institute of Management (IIM), Ahmedabad, and Hyderabad University, respectively, are also part of the committee.

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