The Food Corporation of India (FCI) is all set to get a major facelift. Provided the government accepts the recommendations of the high-level committee. But some of the bold suggestions made by the committee may face quite a few political obstacles.
The seeds have been planted and all that's really needed for the radical proposals made by the high-level committee on the matter to germinate into full-fledged farm sector reforms is some TLC from the government. Here are some of the bolder steps the committee has proposed:
1) Hand over procurement of wheat, paddy and rice from states like Andhra Pradesh, Punjab, Haryana, MP and Chattishgarh, which has surplus production to the respective state governments.
This will allow the FCI to focus on deficient states.
2) Encourage states to computerise PDS (Public Distribution Sysytem), introduce direct cash transfers,
And reduce coverage of NFSA to 40 percent from the current 67 percent. This will not only plug any leakages in procurement by states, it will improve efficiency.
3) Link the issue price under PDS to the minimum support price. This, the report says, will prevent the government from using MSP hikes for political mileage.
4) Reduce the role for FCI, thereby increasing market interplay, and making for lower food prices.
The report goes one step further when it comes to overhauling FCI.
The report points out that FCI's total debt has risen to Rs 87,700 crore, nearly 33 times its equity capital.
Also, as of December 2014, bank food credit lent for procurement stood at Rs 1.08 lakh crore which is an indication of rising accumulated losses due to excessive hoarding.
To solve this, the committee has recommended limiting FCI's storage needs, and enhancing the role of private players and farmers in this area.
It also suggests that farmers be allowed to use the negotiated warehousing receipt system, which will let them get up to 80 percent advance from banks against their produce as and when the price is right.
This, it says, will help reduce the burden on PSU banks, and ease the pressure on over-leveraged procurement agencies.
Other recommendations include:- mechanisation at warehouses- reduction in the aberrations in wage payments - improving the conditions of contract labourers- giving farmers Rs 7000 per hectare as direct cash subsidy for fertilisers.
If implemented, these suggestions could kick-start much-needed reforms in India's farm sector. A lot of these measures can be political hot-potatoes, but with a high food and fertiliser subsidy burden playing on the government's mind, the government will have to walk a thin line to get its way, even if it does enjoy a majority in Parliament.
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