Supply Chain Analysis of Food Corporation of India

Supply Chain Management Research

5 min readApr 3, 2019

Introduction

The Food Corporation of India (FCI) is an organization created and run by the Government of India and also run by State Governments. Its top official is designated as Chairman. It was started in 1965 under the Food Corporations Act 1964 to implement the following objectives of the National Food Policy :

Effective price support operations for safeguarding the interests of the poor farmers.
Distribution of foodgrains throughout the country for Public Distribution System (PDS).
Maintaining a satisfactory level of operational and buffer stocks of foodgrains to ensure National Food Security.
Regulate market price to provide foodgrains to consumers at a reliable price.

It is one of the largest corporations in India and each year it purchases roughly 15 to 20 percent of India’s wheat output and 12 to 15 percent of its rice output. The purchases are made from the farmers at the rates declared by the Govt. of India. This rate is called MSP (Minimum Support Price). There is no limit for procurement in terms of volume, any quantity can be procured by FCI provided the stock satisfies FAQ (Fair Average Quality) specifications with respect to FCI.

Operations

Its operations involve the procurement of rice and wheat from farmers, storing them in depots, transporting them all over India and they end when stock exists from its depots. These stocks are issued to the state government nominees at the rates declared by the Government of India for further distribution under the Public Distribution System (PDS) to the ration card holders for consumption.

Procurement

The Food Corporation of India procures rice, grains, and wheat from farmers through many routes like paddy purchase centers/mill levy/custom milling and stores them in many types of depots like food storage depots and buffer storage complexes and private equity godowns and silo storage facilities. The difference between the purchase price and sale price, along with internal costs, are reimbursed by the Union Government in the form of food subsidy. At present, the annual subsidy is around $10 billion. FCI by itself is not a decision-making authority; it does not decide anything about the MSP, imports or exports. It just implements the decisions made by the Ministry of Consumer Affairs, Food, and Public Distribution and Ministry of Agriculture.

Storage

Storage plan of FCI is primarily to meet the storage requirement for holding stocks to meet the requirements of the Public Distribution System and Other Welfare Schemes undertaken by the Government of India. Also, buffer stock is to be maintained for ensuring food security of the nation.

Besides having own storage capacity, FCI has hired storage capacities from Central Warehousing Corporation, State Warehousing Corporations, State Agencies, and Private Parties for the short term as well as for guaranteed period under Private Entrepreneurs Guarantee Scheme.

Storage Capacity for Central Pool Stocks (Fig in Lakh MT)

Private Warehousing Scheme

Under PWS scheme, godowns are hired by FCI from private parties on lease + services basis through open tender inquiry minimum for a period of one year extendable by maximum another one year (can be rehired in the extended period after giving three months’ notice). GMs (Region), FCI can sanction rates up to Rs. 5.21 per quintal per month, EDs (Zone), FCI up to Rs. 6.76 per quintal per month and HQs beyond this. This scheme has been extended up to 31.03.2021.

Movement

FCI undertakes movement of foodgrains in order to:

Evacuate stocks from surplus regions.
Meet the requirements of deficit regions for NFSA/ TPDS and Other Schemes.
Create buffer stocks in deficit regions.

Punjab, Haryana and Madhya Pradesh are the surplus States in terms of wheat procurement vis-a-vis their own consumption. Punjab, Haryana, Andhra Pradesh/ Telangana, Chhattisgarh and Odisha are surplus States in terms of rice procurement vis-à-vis their own consumption. Surplus stocks of wheat and rice available in these States are moved to deficit States to meet the requirements under NFSA/ TPDS and other schemes as well as to create buffer stocks.

On an average of 40 to 42 million tonnes of foodgrains are transported by FCI across the country in a year. FCI undertakes massive movement operation of foodgrains all over the country encompassing around 1906 FCI owned & hired depots/silos, 557 rail-heads (owned by Indian Railways and others) and 98 FCI own sidings.

Mode of Transportation

Movement of foodgrains is undertaken by Rail, Road, and Waterways. Around 85% of stocks are moved by rail to different parts of the country. Inter-State movement by road is mainly undertaken in those parts of the country which are not connected by rail. A small quantity is also moved by ocean vessels to Lakshadweep and A&N Islands as well as through coastal shipping and riverine movement to Kerala/Agartala (Tripura).

FCI has 98 own Rail sidings, where foodgrain rakes are placed directly at FCI depots. Other than that, foodgrain stocks are transported ‘to and fro’ from the nearest rail-heads of Indian Railways.