Corruption in FCI is frightening; revamp report addresses root causes: Shanta Kumar

Shanta Kumar, senior Bharatiya Janata Party leader, former chief minister of Himachal Pradesh and former union food minister, headed a high level committee on reorienting the role and restructuring of the Food Corporation of India. The committee submitted its report to the Prime Minister on Wednesday, in which it has suggested a complete overhaul of the food economy. (See this article for the recommendations). In this interview with Seetha, Kumar explains what the report sets out to do and how it will change things. Excerpts:

Many of the recommendations in the report are quite radical. How politically feasible are they?

When working on the report, I was not keeping political considerations in mind. In such matters, I have always kept economic and national issues in the forefront and keep politics aside. In any case, even politically, I feel that implementing this report will be beneficial.

When over 8 crore farmers who are deprived of the benefits of minimum support price start getting direct input subsidy in cash, they will feel someone is looking out for them. It will be a huge relief especially for those poor farmers who are driven to suicide. Secondly, when the 40-50 per cent of poor consumers who do not get subsidised food because of leakages in the public distribution system (PDS) get money in their bank accounts, they will also benefit. So politically implementing this report will not entail any damage.

One criticism that can be levelled is that we are recommending reducing the coverage under the National Food Security Act from 67 per cent of the population to 40 per cent. But at the same time we have recommended increasing allocation to 7 kg per person from 5 kg. This report is both pro-farmer and pro-poor.

This proposal is bound to run into problems. This requires an amendment to the Act, which only Parliament can do. The Congress will never agree to this, nor will many other parties.

The Congress has to oppose on some excuse or the other. They won’t be able to say anything negative about the report and they will pick on this. Look, the country has made a lot of economic progress, but social justice is lacking. Development without social justice is no development at all. I am committed to antyodaya, Swami Vivekananda’s daridra narayan. From the time I became chief minister in 1977, I have tried to see how those who have been left behind can be benefited.

Is cash transfers the way to go about it?

Definitely. It will be income support for both the poor farmer and the poor consumer.

Besides, India’s delivery system is so inefficient and corrupt that no matter what you do, it is not possible to reach subsidised food to all the beneficiaries. The more complicated the system, the more corrupt it will be; the more simpler it is, lesser the chances of corruption.

There’s also the distortion in the market. When the market price of rice is Rs 40 a kg and it is being supplied at Rs 3 and Re 1 through the PDS, diversion is inevitable. It can’t be stopped. That is why the global discourse is about income support instead of market support.

How much savings can be expected from cash transfers?

In the case of fertiliser subsidy, the cash transfer of Rs 7000 per hectare will result in savings of Rs 15,000-20,000 crore. In the case of food subsidy, the government will save Rs 30,000 crore.

Can cash transfers co-exist with minimum support prices (MSP) and state procurement? If you are giving cash to the poor to buy from the market, what happens to the food grains that are procured by the FCI?

As it is, all those beneficiaries who don’t get subsidised rations because of leakage are buying from the market and not getting compensated for it.

But we will have to keep food stocks as a buffer. A country like India will need a buffer. If we have to give relief to the farmers, we will need MSP. MSP will have no meaning if we don’t procure. If we procure food grains, they will accumulate. But we can use food stocks in excess of the buffer norms to regulate and stabilise the market. Or we can export. That is why the report has said there should be a definite liquidation policy for the stocks.

What about the PDS if we shift to cash transfers. Will it get phased out?

It will stay for some time. It should. Then an option can be given to states and consumers. Then, based on experience gained over three-four years we can review the situation.

You haven’t recommended trifurcation/unbundling of FCI, which the BJP manifesto had talked about.

This has been done indirectly. We have distributed its work to different agencies. We have said let states do the procuring; that will reduce FCI’s role in procurement. We have spoken of outsourcing stocking of food grains to the Central Warehousing Corporation, State Warehousing Corporations and private players; that reduces FCI’s role in stocking. FCI will only play a regulatory role in food grain management.

If we had recommended trifurcation, then there would have been three corporations, three chairmen, three boards of directors. The number of employees would have grown. This would have only added to non plan expenditure. Our recommendations will help achieve the objectives of trifurcation without this.

There are a lot of issues related to the internal working of the FCI itself – inefficiencies, corruption. The report has not dealt with that.

When work is reduced or simplified, the scope for corruption will also reduce.

The maximum corruption is in the quality control specification and checking. Right now, food grains are manually checked, someone picks up a fistful of grain and says the moisture level is 5 per cent or 10 per cent. We have said quality control should be transparent and mechanised.

There is also a lot of corruption in rice procurement. States procure paddy and give it to rice millers and FCI procures the rice that the millers produce. We were surprised to find that in the large states, FCI was procuring 12 per cent of the wheat produced and 70 per cent of rice. Some states asked us when you have given us the task of procuring wheat, why not rice? We kept asking FCI this. Later we came to know that this is source of a lot of corruption.

We had joint stakeholders’ meetings across states. In two of these meetings, the rice millers openly complained about how they were at the mercy of FCI officials who would nitpick about the quality of rice and the amounts of the bribes involved. That is why we have said states should procure both wheat and rice. If states procure poor quality rice, it is their responsibility. The level of corruption is frightening. We have tried to remove the root causes of corruption.

What about the unwieldy size of FCI?

When its workload is reduced, then there will be pruning of staff. We have said zonal offices should be trimmed over time. In the case of the departmental loaders, we have recommended a voluntary retirement scheme and phasing them out. This will have to done gradually over time. When work is outsourced, there will be need for further trimming. The union is very strong, problems will be there. But someone will have to start from somewhere.

Seetha is a senior journalist and author