Shanta Kumar Committee

Background and evolution

The Food Corporation of India (FCI) was set up in 1965 under the Food Corporations Act, 1964, to procure food grains at minimum support prices, maintain buffer stocks and distribute grain through the Public Distribution System. Over time, FCI became associated with high costs, overflowing stocks, storage losses and concentration of procurement in a few states such as Punjab, Haryana and Madhya Pradesh.

The National Food Security Act, 2013 (NFSA) gave a legal entitlement to subsidised grain for up to 75% of the rural and 50% of the urban population. With food subsidy bills rising, the government in 2014 set up a High Level Committee under Shanta Kumar to suggest how FCI could be restructured to improve operational efficiency and financial management.

Key features and provisions

• Procurement: FCI should hand over procurement to states with good experience, such as Punjab, Haryana, Andhra Pradesh, Chhattisgarh, Madhya Pradesh and Odisha, and focus on states where farmers face distress sales, such as eastern India.
• NFSA coverage: reduce coverage from 67% to about 40% of the population, and give priority households 7 kg per person at subsidised prices.
• Cash transfers: gradually introduce cash transfers in place of physical grain, starting with large cities with more than one million population.
• Buffer stock: create a transparent liquidation policy to sell excess stocks in open markets or export them.
• Storage: modernise storage through private sector participation and silos, reduce covered and plinth storage.
• Negotiable warehouse receipts: allow farmers to deposit grain in registered warehouses and get bank credit against receipts.
• Labour: reform FCI's labour arrangements, where some departmental workers earned unusually high wages.
• Fertiliser subsidy: shift to direct cash subsidy to farmers per hectare.
• End-to-end computerisation of PDS to cut leakages.