By: M.S.Yatnatti: Editor and Video Journalist Bengaluru: Given that leakages in PDS reportedly range from 40 to 50 percent, and in some states reportedly go as high as 60 to 70 percent, GoI should defer implementation of NFSA in states that have not done end to end computerization; have not put the list of beneficiaries online for anyone to verify, and have not set up vigilance committees to check pilferage from PDS. Karnataka government has reportedly nominated five persons for state level food vigilance committee .The State Government with an aim to monitor the distribution of the essential commodities that are being distributed through the Public Distribution System (PDS) and thereby to ensure the participation of the Public in monitoring of PDS, has constituted vigilance committees. State level has been constituted by nominating five unofficial members with host o official members andpublic representatives which will under the chairmanship of Hon' ble Minister for Food, Civil supplies and Consumer Protection.High Level Committee (HCL) on restructuring of Food Corporation of India (FCI) has submitted its report to the Government. It was submitted by Shri Shanta Kumar, Chairman of the Committee to the Prime Minister, Shri Narendra Modi 21-01-2015 . The HCL was set up by the Government on 20th August, 2014.The major issue before the Committee was how to make the entire food grain management system more efficient by reorienting the role of FCI in MSP operations, procurement, storage and distribution of grains under Targeted Public Distribution System(TPDS).The Committee had wide consultations with several Chief Ministers, Food Secretaries and other stakeholders in various States. Suggestions from public were invited through various newspapers also. Executive Summary of the report is as follows- Backdrop: Government of India (GoI) set up a High Level Committee (HLC) in August 2014 with Shri Shanta Kumar as the Chairman, six members and a special invitee to suggest restructuring or unbundling of FCI with a view to improve its operational efficiency and financial management. GoI also asked HLC 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.The HLC had wide consultations with various stakeholders in its several meetings in different parts of the country. It also invited comments through advertisements in newspapers and electronic media. HLC would like to gratefully acknowledge that it has benefitted immensely from this consultative process, and many of its recommendations are based on very intensive discussions with stakeholders. In order to conceive reorienting the role of FCI and its consequent restructuring, one has to revisit the basic objectives with which FCI was created, and what was the background of food situation at that time. It is against that backdrop, one has to see how far FCI has achieved its objectives, what the current situation on foodgrain front, what are the new challenges with regard to food security, and how best these challenges can be met with a reoriented or restructured institution like FCI.FCI was set up in 1965 (under the Food Corporation Act, 1964) against the backdrop of major shortage of grains, especially wheat, in the country. Imports of wheat under PL- 480 were as high as 6-7 MMT, when country's wheat production hovered around 10-12 MMT, and country did not have enough foreign exchange to buy that much quantity of wheat from global markets. Self-sufficiency in grains was the most pressing objective, and keeping that in mind high yielding seeds of wheat were imported from Mexico. Agricultural Prices Commission was created in 1965 to recommend remunerative prices to farmers, and FCI was mandated with three basic objectives: (1) to provide effective price support to farmers; (2) to procure and supply grains to PDS for distributing subsidized staples to economically vulnerable sections of society; and (3) keep a strategic reserve to stabilize markets for basic foodgrains. How far FCI has achieved these objectives and how far the nation has moved on food security front? The NSSO's (70th round) data for 2012-13 reveals that of all the paddy farmers who reported sale of paddy during July-December 2012, only 13.5 percent farmers sold it to any procurement agency (during January-June 2013, this ratio for paddy farmers is only 10 percent), and in case of wheat farmers (January-June, 2013), only 16.2 percent farmers sold to any procurement agency. Together, they account for only 6 percent of total farmers in the country, who have gained from selling wheat and paddy directly to any procurement agency. That diversions of grains from PDS amounted to 46.7 percent in 2011-12 (based on calculations of offtake from central pool and NSSO's (68th round) consumption data from PDS); and that country had hugely surplus grain stocks, much above the buffer stock norms, even when cereal inflation was hovering between 8-12 percent in the last few years. This situation existed even after exporting more than 42 MMT of cereals during 2012-13 and 2013-14 combined, which India has presumably never done in its recorded history. What all this indicates is that India has moved far away from the shortages of 1960s, into surpluses of cereals in post-2010 period, but somehow the food management system, of which FCI is an integral part, has not been able to deliver on its objectives very efficiently. The benefits of procurement have not gone to larger number of farmers beyond a few states, and leakages in TPDS remain unacceptably high. Needless to say, this necessitates a re-look at the very role and functions of FCI within the ambit of overall food management systems, and concerns of food security.Major Recommendations of HLC: Below is a summary of major recommendations of HLC keeping in mind how procurement benefits can reach larger number of farmers; how PDS system can be re-oriented to give better deal to economically vulnerable consumers at a lower cost and in a financially sustainable manner; and finally how stocking and movement operations can be made more efficient and cost effective in not only feeding PDS but also in stabilizing grain markets. On PDS and NFSA related issues: HLC recommends that GoI has a second look at NFSA, its commitments and implementation. Given that leakages in PDS range from 40 to 50 percent, and in some states go as high as 60 to 70 percent, GoI should defer implementation of NFSA in states that have not done end to end computerization; have not put the list of beneficiaries online for anyone to verify, and have not set up vigilance committees to check pilferage from PDS. HLC also recommends to have a relook at the current coverage of 67 percent of population; priority households getting only 5 kgs/person as allocation; and central issue prices being frozen for three years at Rs 3/2/1/kg for rice/wheat/coarse cereals respectively. HLC's examination of these issue reveals that 67 percent coverage of population is on much higher side, and should be brought down to around 40 percent, which will comfortably cover BPL families and some even 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 Rs 3/2/1/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. HLC would recommend greater investments in agriculture in stabilizing production and building efficient value chains to help the poor as well as farmers. HLC recommends that targeted beneficiaries under NFSA or TPDS are given 6 months ration immediately after the procurement season ends. This will save the consumers from various hassles of monthly arrivals at FPS and also save on the storage costs of agencies. Consumers can be given well designed bins at highly subsidized rates to keep the rations safely in their homes. HLC recommends gradual introduction of cash transfers in PDS, starting with large cities with more than 1 million population; extending it to grain surplus states, and then giving option to deficit states to opt for cash or physical grain distribution. This will be much more cost effective way to help the poor, without much distortion in the production basket, and in line with best international practices. HLC's calculations reveal that it can save the exchequer more than Rs 30,000 crores annually, and still giving better deal to consumers. Cash transfers can be indexed with overall price level to protect the amount of real income transfers, given in the name of lady of the house, and routed through Prime Minister's Jan-Dhan Yojana (PMJDY) and dovetailing Aadhaar and Unique Identification (UID) number. This will empower the consumers, plug high leakages in PDS, save resources, and it can be rolled out over the next 2-3 years.On stocking and movement related issues:HLC recommends that FCI should outsource its stocking operations to various agencies such as Central Warehousing Corporation, State Warehousing Corporation, Private Sector under Private Entrepreneur Guarantee (PEG) scheme, and even state governments that are building silos through private sector on state lands (as in Madhya Pradesh). It should be done on competitive bidding basis, inviting various stakeholders and creating competition to bring down costs of storage. India needs more bulk handling facilities than it currently has. Many of FCI's old conventional storages that have existed for long number of years can be converted to silos with the help of private sector and other stocking agencies. Better mechanization is needed in all silos as well as conventional storages.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. Movement of grains needs to be gradually containerized which will help reduce transit losses, and have faster turn-around-time by having more mechanized facilities at railway sidings. HLC recommends total end to end computerization of the entire food management system, starting from procurement from farmers, to stocking, movement and finally distribution through TPDS. It can be done on real time basis, and some states have done a commendable job on computerizing the procurement operations. But its dovetailing with movement and distribution in TPDS has been a weak link, and that is where much of the diversions take place.