FCI may outsource procurement

The Food Corporation of India (FCI) proposes to outsource foodgrain procurement operations to the private sector to reduce costs.

This is a part of the action plan mooted by the FCI to woo more states to participate in decentralised grains procurement.

Traders, rice millers and private companies can be appointed sub-agents of the FCI or state governments to take up not only the procurement under price support operations but also storage, transportation, milling and delivery of rice to the public distribution system (PDS).

Several other initiatives had already been taken to trim foodgrain management costs in a bid to bring down the food subsidy, FCI Chairman and Managing Director VK Malhotra said in a press conference convened to mark the completion of 40 years of FCI.

It had granted voluntary retirement to about 7,000 officers and 3,000 labour employees to lower its salary bill. The jobs held by the out-going employees had been abolished as part of this policy.

"The FCI's annual salary bill had consequently fallen to Rs 2,600 crore, which is merely 3.5 per cent of the total turnover of Rs 68,000 crore," Malhotra said.

He said the proposed issue of government-guaranteed bonds to raise funds for FCI's operations at a lower interest rate would come out soon. About Rs 1,000 crore will be raised through this route in the current fiscal year.

About Rs 5,000 crore was proposed to be raised through bonds at an interest of around 7 per cent, against over 10.5 per cent charged by the consortium of banks on food credit.

Besides, the FCI proposed to computerise its operations and go into ISO certification by March this year to ensure greater efficiency. It also planned to get its stocks insured to reduce storage losses.

The possibility of outsourcing the long-distance transportation of foodgrains to deal with the menace of transit losses is also under consideration.

Elaborating on decentralised food procurement, Malhotra said the states were being made to realise that they were losing annually potential tax revenue of around Rs 710 crore by not participating in this scheme.

Besides, the farmers were losing Rs 1,167 crore of additional income that they would have got by selling the produce at the minimum support prices.

UP, Uttaranchal, Orissa, West Bengal, Madhya Pradesh, Andhra Pradesh and Chhatisgarh had scope for increasing local procurement of both wheat and rice. This would help save on cost of transporting grains from distant areas to these states for their PDS, Malhotra said.