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MrunalSummary:ShantaKumarReportFCIreform&Foodsecurity

Mrunalhttp://mrunal.org

[GS3]ShantaKumarreportonFCIrestructuring,Bufferstock,PDS
&Foodsecurity&DirectBenefitTransfer
PostedByMrunalOn12/02/2015@2:00pmInEconomy|44Comments
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WhatisFoodsecurity?
OriginofFCI
TimelineofFoodmanagementinIndia
DisturbingNumbers:FCIandFoodMismanagement
ShantaKumarCommitteeonFCIrestructuring
1. #1:OutsourceprocurementtoStateGovernments
2. #2:ProcurementPaymentreforms
3. #3:Bufferstockreforms
4. #4:Storagereforms
5. #5:Transportreforms
6. #6:DirectcashtransfertoFarmer
7. #7:DirectcashtransfertoConsumer
8. #8:CurtailNationalFoodsecurityAct(NFSA)
9. #9:PinkslipsandVRS
6. CriticismagainstShantaKumarreport
7. Appendix:FCIstructure
8. MockQuestionsforCSAT

WhatisFoodsecurity?
Foodandagricultureorganization(FAO)saysFoodsecurityismadeupoffourpillarsviz.Availability,
Affordability,Nutrition,andStability.
FoodsecurityPillar
foodshouldbeavailablein
sufficientquantityatalltimes
andatallplaces
FoodshouldbeaffordableTo
poorpeople
Foodshouldbenutritiousto
ensurehealthydevelopmentof
bodyofmind.
Infoodpricesandsupplymust
bestable.Otherwisepolitical
andsocialunrest.

WhathasIndiadonetoachieveit?
Union:MSP,fertilizersubsidy
States:cheapcanalwaterandelectricity
Together,theyencouragefarmerstoproducemoregrains.
ThroughTargetedPDSandNationalFoodSecurityAct(NFSA),
Governmentprovidescheapgraintopoor.
ThroughMiddaymeal,FoodsecurityAct,IntegratedChild
Developmentscheme(ICDS)andhalfdozenotherschemes,
Governmentensuresnutritiousfoodtochildren.
FCIkeepsbufferstockofgrains.Itcanbesoldtoopenmarketor
distributedamongpeopleduringhighinflation,naturaldisasteretc.

OriginofFCI
Inthe50sand60s,Indiafacedmajorshortageofgrains.
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Ourdomesticwheatproductionwasverylow.Ourforeignexchangereservetoowasverylow.
Wecouldnotsustainwheatimportfromglobalmarketfromourown.Therefore,wehadtoreply
onAmericanPL480Foodforpeaceprogram.Buttheshipmentswereirregular.
FinallyGovernmentdecidedtoendthishumiliationbyfocusingonselfsufficiencyinfood
production.
Weimportedhighyieldingseeds(HYV)ofwheatfromMexico,distributedthemtofarmersalong
withsubsidizedfertilizers.
EndresultisknownisGreenrevolution.Youcanreadmoreaboutitsfeatures,phasesand
limitationsinNCERTClass11Economy,page24onwards.
TimelineofFoodmanagementinIndia
StateGovernmentbeginenactingtheirAgriculturalProduceMarketCommittee(APMC)Acts
1950s toprotectfarmers.Butitfailstocurbthenuisanceofmiddlemen,hoardingandinflation.For
moreclickme
FoodcorporationActpassed.SubsequentlyFCIsetupin1965.FCIfallsunderMinistryof
1964
consumeraffairs,foodandpublicdistribution.

1965

AgriculturalPricesCommissionbeginsprescribingminimumsupportprice(MSP)for
staplefoodsuchaswheatandrice.
FCIwasorderedtobuygrainsfromfarmers,atthisprice,IFfarmercouldntsellhis
produceinopenmarket.

1985

CACP:CommissionforAgriculturalCostsandPrices(CACP)underAgriculture
ministry,recommendsminimumsupportprices(MSP)basedoncertaineconomic
criteriafor23cropsbeforeeachRabiandKharifSeason.
AndforSugar,DepartmentoffoodandPublicdistributiondecidestheFairand
remunerativeprice(FRP).
Thus23+1sugar=24agrocommoditiescoveredunderpublicprocurementsystem.

1997

DecentralizedProcurementScheme(DCP),introduced
NowonbehalfofFCI,therespectivestategovernmentsthemselveswillprocure
foodgrainsfromfarmersanddistributethemamongpoorbeneficiaries.
Intheory,thisoughttoreducetransportcostandleakagesbutveryfewstatesadoptedit,
thattooforriceonly.

1997

TargetedPublicdistributionsystem(TPDS)
Twotierpricingstructure:BPLandAPL.
StateGovernmentsdecideBPLandAPLbasedPlanningcommissionguidelines.

2000
2003

AntyodayAnnaYojana:25kgfoodgrainperfamilyattherateofWheatRs.2andRiceRs.3
perkilo
UnionGovernmentdraftsModelAPMCAct,asksstategovernmentstoadoptit.Although
manystatesyettoimplement.
PrivateEntrepreneursGuarantee(PEG)SchemeunderDepartmentofFood&Public
Distribution(DFPD).Underthisscheme,newgodownswillbeconstructedonPPPfinance,

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2008

2010

2010
2013

MrunalSummary:ShantaKumarReportFCIreform&Foodsecurity

FCIwillhireprivategodowntostorepublicprocuredfoodgrainforcontractualperiodof10
years.
NutrientBasedsubsidy(NBS)regime.
UnderNBS,govt.givessubsidybasedonweightofthedifferentMacro/micronutrient
inthefertilizertocompanies,sotheydesignnewproductmixeswithmicronutrients,
accordingtosoilrequirementineachregion.
Although#EPICFAILBecauseUreanotcoveredinthissystem.
AnewstatutorybodyWarehouseDevelopmentandregulatoryauthorityunderconsumer
affairsministry.ItcertifieswarehousesandresolvesdisputesrelatedtoNegotiable
WarehousingReceipts(NWR)
NationalFoodsecurityActpassed.clickmeformoredetailedarticle

DisturbingNumbers:FCIandFoodMismanagement

23

Only
6%

Isthenumberofcropsforwhich,CACPannouncesminimumsupportprices(MSP).This
includesevennonfoodcropssuchascottonandjute.But
OfIndianfarmerscouldselltheirproducetoGovernmentagencies.
Otherfarmersareeitherunaware,orlacktheaccesstoMSPsystem.
OnlythebigfarmersinnorthwesternstateshavebenefitedfromthisMSP

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procurementsystem.
OfPDSgrainsaresiphonedofftoblackmarket,saysNSSOreport(2011)
FCItransports25lakhgunnybagseverydaysoimaginethescam!
BestStatesChhattisgarh,AndhraPradeshandTamilNadu
MostBogus:Manipur,DiuDaman,Delhi.

40
60%

Forthelast45years,FCIhasstoreddoublethegrainsthanprescribedbufferlimits.Result?
Double (1)shortageinopenmarketandtherebyinflation(2)rottengrainsduetoFCIslimited
Storagecapacity.
Wasthefoodinflationinrecentyears,YETGovernmentdidnotreleasegrainsfromitsFCI
812%
warehousestoincreasesupplyandcurbinflation.
58%
OfsubsidizedfoodgraindoesntreachBPLfamilies.(Planningcommission,2005)
1.15
Istheofficialbudgetallotmentforimplementingfoodsecurityact,tocover67%ofIndians
lakh
(201415)
Cr.
Stateshavesofarimplementedfoodsecurityact.Haryana,Delhi,HimachalPradesh,
YET
Rajasthan,Punjab,Karnataka,Chhattisgarh,MaharashtraChandigarh,BiharandMadhya
only
Pradesh.Otherstatesaregiventimeextensionbecausetheyreyettoevenidentifythe
11
beneficiaries.
IsthenumberofagriculturehouseholdsinIndia.3/4thofthemnotevenawareofMSP
9cr.
system.(NSSO,2012)
Bottomlineis,FCIhasfailedinallthreeobjectivesbecause
Objective
1.Procurement
2.Storage
3.Distribution

Whyfail?
LargenumberoffarmersareoutoftheMSPregime.
Largequantityoffoodgraineithersiphonedofforgetsrotten
TargetedPDSsystemhasunacceptablyhighleakages.

Inthelightoftheseproblems,ShantaKumarCommitteewassetup

ShantaKumarCommitteeonFCIrestructuring

Chairman

Purpose

ShantakumartheexCMofHimachalPradesh,ExUnionministerforConsumer
affairsministryandlaterruralDevelopmentministry.
Plus,6memberswhosenamesnotimportantforexam.
HowtoRestructureFCIorganization?
Howtoreformpublicprocurement,foodstorageanddistribution?

Duration Setupin2014August,gavereportin2015January.
UPSCMainsexamination:
GS2Paper:Welfareschemesforvulnerablesectionsofthepopulationbythe
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Relevance

MrunalSummary:ShantaKumarReportFCIreform&Foodsecurity

CentreIssuesrelatingtopovertyandhunger.
GS3Paper:Issuesrelatedtodirectandindirectfarmsubsidiesandminimum
supportpricesPublicDistributionSystemobjectives,functioning,limitations,
revampingissuesofbufferstocksandfoodsecurity.
hencethis15pagePh.Darticle

Letscheckhisrecommendationsonebyone:

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#1:OutsourceprocurementtoStateGovernments
ShantasaysFCImustnothandlegrainprocurementforentireIndia
Avoidtheseareas
Punjab,Haryana,AndhraPradesh,Chhattisgarh,
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Focushere

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MadhyaPradesh,Odisha

ThesestateGovernmentsalreadyhavesufficient
experience,manpowerandinfrastructureto
procuregrainsfortheirownPDSrequirements.

EasternUttarPradesh,Bihar,WestBengal,Assam
IntheStates,MarketratearebelowMSP.
SmallFarmersareexploited.
Their(Bogus)Stategovernmentsareinept
andlackinfrastructuretoprocuregrains
fromthefarmersinatransparentand
efficientmanner.

SoFCIshouldsimplyhandoveroperations
Tothestategovernmentsunder
decentralisedprocurementsystem.
FCIitselfProcuregrainsfromthestates,untilthe
Forshortterm,givethemtechnicaltraining situationimproves.
andarrangethemfinancethroughADB
IFCetc.internationalbodies.

#2:ProcurementPaymentreforms
PopulariseNegotiableWarehouseReceiptSystem(NWRs).Encouragefarmertodeposithis
producetoanauthorizedwarehouse,getareceipt,andborrowagricultureloanfornextcrop
cycle,frombanksandcooperatives,bypledgingthosereceipts.LoanValueofsuchreceiptswill
be80%oftheMSPxquantitystoredinwarehouse.
IfmarketpricesdipbelowMSP,governmentshouldonlycompensatefarmerforthelosses
incurred,butwithoutprocuringgrain.i.e.letthemstoreandsellittoprivateplayerslateronwhen
marketrecovers.
IfstategovernmentpaysadditionalbonusoverandabovetheMSPtoitsfarmers(mainlyforvote
bankpolitics)stillFCIshouldnotprocuremoregrainfromthatstate,oncebufferstockquotais
filled.[AtpresentFCIindulginginopenendedprocurementi.e.allincominggrainisaccepted,
evenifbufferstockisfilled.]
FCIorthirdpartymustperformQualitycheckbeforeacceptinggrainsfromstategovernment
agenciesandfarmers.Dontacceptsubstandardgrains.
OnFCIprocurements,Stategovernmentlevycommissionbetween2%to15%.Thereshouldfix
uniformrateforentireIndiajust3%.

#3:Bufferstockreforms
FCIissupposedtomaintainbufferstockofgrainstowardofanyemergencyfoodshortage
situationduringnaturaldisaster,famineorwar.
Butovertheyears,FCIhasovercrossedbufferstocknormsleadingtorottengrainandshortage
inopenmarket.Observefollowinggraph:

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WhyFCIdidovercrossBufferstocknorms?
1. Lackofcoordination.WhileFCIisbasicallyakeeperofgrains.Buthowmuchgrainshouldbe
storedasbuffer/backupforemergencies?Consumerministrydecidesthat.
2. Forvotebankpolitics,UnionGovernmentalwaysincreasesMSPforwheatandriceeachyear.
ANDstategovernmentstooofferadditionalBONUStofarmersaboveMSPs.Hencemost
farmersprefertogrowricewheatinsteadofmovingtovegetablesandedibleoils.
3. GiventhisoversupplyofwhatandricetheMarketforceswillofferlowerpricestofarmers.So,
bigfarmersfromrichstatesapproachFCIandstateprocurementagencies.
4. Openendedprocurementi.e.FCIdoesnthaveaquotainmindwhateverwheat/ricethe
farmers/stateagenciessupplytoFCIitpurchasesallofit.
5. Ideally,FCIshouldsellofftheexcessfoodgrains,abovethebufferquota,toopenmarketthatll
increaseretailsupplyandstabilizeprices.
6. Butthereisnoautomaticliquidationrule.ItalldependsonGovernmentsmood.
Results?
1. Rottenwheatononeside+foodinflationonotherside=>Croresofrupeewastedbyboth
Governmentandconsumers.
2. Governmentrandomlybansexportbansonwheatriceduringfoodinflation,withoutfindingthe
underlyingreasons.ThishurtsourexportcompetitivenessparticularlyinricewhereIndiais
worldslargestexporter.
ShantaKumarsprescribednormsforFoodstocking
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ToimplementFoodsecurityAct ~61MMT
StrategicReserve
5MMT
Sufficienttoimport
Forexcurrencyreserve

3MMTwheat
2MMTRice.
=total5MMTfoodgrain

WheneverFCIhasgrainsabovebuffernorms,itshouldautomaticallysellexcessstockinopenmarket.
a.k.a.ProActiveLiquidationPolicy.

Noharminimporting
Reduceimportdutyonwheatandrice.
Insteadofkeepingexcessivebuffer/backupstorage,juststoreinmoderatequantity.Andasand
whenrequired,simplyimportriceandwheatfromworldmarket.
Sameway,insteadoftransportingricefromAndhraPradesh/PunjabtoNorthEast,itscheaperto
importricefromMyanmartoNorthEast.

#4:Storagereforms
FCIshouldgraduallyoutsourcegrainstoragefunctiontocentralwarehousingcorporation(CWC),
statewarehousingcorporation(SWC),andprivatesectorplayersunderPrivateEntrepreneur
Guaranty(PEG)Scheme)oncompetitivebiddinggivethemcontracttostoreFCIgrainsfor20
years.
DontstoregraininCoverandplinthgodowns.ConvertthemintoSiloswithMechanized/
roboticassemblies,withhelpofprivatesector.MadhyaPradeshhasalreadybegundoingthis.
EndtoEndcomputerizationandOnlinetrackingofentiresystemfromprocurementtoretail
distribution.
NorthEastandJammuKashmirstateGovernmentsmustcreatestoragecapacitythatcanlastfor3
months.So,evensustainduringbadweather,naturaldisasterandbandhhartals,thereisno
shortageoffood,eveniftheyrecutofffromrestofIndia.
Ifgrainsaretransportedincontainers,insteadofgunnybags,itllreducelosses,getfasterturn
aroundtimeatrailwaysandwaterways.
Immediatelyaftertheprocurement,give6monthsrationtopoorbeneficiaries,withcheapgrain
binsforstorage.Result?FCIwillhavetostorelessgraininitsgodowns.Juntaathemselveswill
takecareofstorage.

#5:Transportreforms
Asfaraspossible,grainshouldbetransportedincontainers.Itshouldbepackedingunnybacks
onlyatDistrictHQlevelfromwhereitllbetransportedtoretailoutlets
Stoplabourersfromusingironhookstoliftgunnybags.Providebagswithearstoeliminate
hookrequirement.
Asandwherepossible,useforkliftsinsteadofmanuallabour.
Improvednightsecurityatrailpoints,because>85%ofPDSGrainistransportedthrough
railwaysandmaximumsiphoningoffoccurshere.
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Constructsilosatmandis,andproviderailconnectivitytothem.
Asandwherepossible,useinlandwatertransportformovingwheatandrice.Examplefrom
VisakhapatnamtonortheastandKerala.Improverailconnectivitybetweensuchportsandtheir
hinterlands.

#6:DirectcashtransfertoFarmer
Presentsystem

GovernmentadoptedNutrientbased
subsidysystem(NBS)
ButUreakeptoutofthissystem.
Result:SoildegradationinPunjab,
Haryana,Rajasthanduetoexcessiveand
mindlessuseofcheapureaeven
smugglingtoneighboringcountries

ShantaSays
Chinagivesdirectcashsubsidytofarmer
accordingtoperhectareowned.Thenfarmer
freetochoosecrop,fertilizer,pesticidesas
perhisrequirement.
ShantarecommendsIndiatooshouldgive
DirectcashsubsidyofRs.5,000to10,000per
hectretofarmersUIDlinkedJanDhan
account.
ThenFarmerwilljudiciouslyuseN,PandK
fertilizersandevenorganicmanures,
accordingtorequirementsofhissoilcrop
requirements.
Hellgrowvegetables,pulses,noncerealsas
perhisbusinesswisdomandprevailing
marketrates.

#7:DirectcashtransfertoConsumer
MSP
FCIsRealCost
Rs./quintal(2014)
Rice 1360(commongrade)1400(Agrade) Rs.3,000/quintal
Wheat 1400
Rs.2,200/quintal
Grain

Suppose,GovernmentwantstoensureallpoorfamiliesgetRiceatRs.3/kg.

MSP
PDS
regime

Direct

Afterconsideringprocurement,storage,distributionandleakagesthecostof
delivering1kgricetopoorfamilyisRs.30.[becauseFCIsrealcostofhandling1
quintalriceIsRs.3,000]
AndifGovernmentsellsittothematRs.3/kg,thenitmeans303=27Rupees
subsidycost.
NFSAwantstogivericeat3/kgbutTamilNadu,AndhraPradeshandChhattisgarh
stategovernmentgivingriceevenatcheaperrate.Allsuchschemesneedtobe
streamlinedintoone.
ShantaKumarsays
GiveRs.700/monthtoAntyodayafamily
GiveRs.500/monthtoPriorityhousehold.

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MrunalSummary:ShantaKumarReportFCIreform&Foodsecurity

cash
transfer

Then,Letthempurchasewhatevercerealandnoncerealfoodstheywishtopurchase
frommarket.
Governmentssubsidyburdenwilldeclineby2025%(30,000to35,000croresin
absolutefigure).
Themoneythussaved,shouldbeusedinimprovingruralinfrastructure.

HowtoimplementDirectCashtransfer?
FirstlinkJanDhanaccountswithAdharcardUIDnumbers.
MoneybetransferredtoladyofthehouseunderDirectBenefittransfer(DBT)
Amountshouldbelinkedwithinflationindex.
Peoplewillbegivenfreechoicetopurchasewhateverfoodtheywantrice,wheat,milk,
vegetables.
First,beginthiscashtransferprocessinbigcitieswithover1millionpopulation.Thentostates
withgrainsurplus.
Completethisprocesswithin2to3years.
J&KandNortheastStategovernmentsshouldbegiventheoptiontoeithercontinuephysical
graindistributionoradoptcashtransfer.

#8:CurtailNationalFoodsecurityAct(NFSA)
FoodSecurityAct2013prescribes

Cover67%ofIndianpopulation
(suchthat,50%urbanand75%
ruralpubliccovered)

StateGovernmenttoidentifythe
beneficiaries,distributegrainsat
subsidizedrateandiftheyfail
theyvetogivemoneytothe
families.
Antyodyahouseholds(AAY)the
bottomstrataofBPLpopulation
willget35kggrainperfamilyon
monthlybasis,atfollowingprice:

ShantaKumarobserves
Governmentdoesnthavethefinancialresourcestocover
somanypeople.
Atmaxweshouldguaranteefoodsecuritytoonlythe
bottom40%poor.
ThistargetwillcomfortablycoverallBPLfamiliesand
someoftheAbovepovertylinefamilies.

Sofaronly11statesfinishedthisprocess.Otherstatesgiven
timeextensiontoimplementNFSA.

Yescontinuethat.

Rice:Rs3/kg
Wheat:Rs2/kg
CoarseGrain:Rs1/kg
No.dontgivesomuchsubsidy.Itshouldbejust50%
belowMSP.
AtpresenttheMSPforwheatis~14Rs/kgeach.So,sell
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Priorityhouseholdsthoseslightly
betteroffthanAAYBPLfamilies
theyllgetgrainsatRs3/2/1/kg.

Priorityhouseholdsget5kggrain
perperson.

ittopriorityhouseholdsatRs.7perkg.(eitherphysical
grainthroughPDSshop,ortransferrequiredsubsidyin
theiraccounttoenablethembuyitatmarketprice.e.g.if
marketpriceisRs.30then307=Rs.23cashtransferin
account)
similarforriceandcoarsegrains.
Otherwise,Governmentssubsidyexpensewillbecome
unsustainable.

UnderTDPSsystem,BPLfamiliesusedtoget7kgper
person.So,Foodsecurityactisactuallyfoolingthem.
Bettergive7kg/perpersontopriorityhouseholds.And
assumingaveragefamilysizeis5membersthuseach
Priorityhouseholdtoowillget7x5=35kgperfamilyper
monthjustlikeAntyodayahouseholds.

Freemeals,takehomeratiosfor
childrenpregnantandlactacting
ShantaKumarsilentontheseissuesbecauseitsbeyondthe
motherstogetcashinstallmentsand
subjectscopeoftheCommittee.HisCommitteeconcernedwith
freemealsgrievanceredressal
FCIreforms.
mechanismatdistrictandstate
level.

#9:PinkslipsandVRS
Worker
FCIstop350babus
FCIsdepartmentallaborer
ContractualLabour

Avg.monthlysalarypaid
Rs.4lakhspermonth!
~25,000to80,000/
Hardly10,000/

ShantaKumarrecommends
Firstbeginmechanizationofoperationstoreducemanuallabourrequirements.
ReducethenumberofZonalandregionaloffices.Keepdirecttouchwithstateagenciesviae
governancemodules.
ThengiveVRStoFCIspermanentstaff.
Attoplevel,hireexecutivesfromprivatesector(insteadofreplyingGeneralistIASon
deputation).
Asandwherepossiblesimplyoutsourceorhiredailywagecontractuallaborers.
Result?LeanerandnimbleFCI,lowcostofoperationsandhighereconomiesofscale.

CriticismagainstShantaKumarreport
SinceShantaKumarcriticizedFCI,thensomeonemustcriticizeShantaKumartocompletetheKarma
Cycle.Andwhoismorequalifiedtoperformthisreligiousduty,thanthecolumnistsattheHindu
newspaper?Soletsbegin:
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Angrytrade ShantarecommendsFCItohirecontractualstaff,closeregionalofficesandgiveVRS
union
toemployees.Tradeunionleadersdontlikeit.Notonebit.
Survey
method
wrong

Shantasaysonly6%farmersbenefitedfromMSPprocurementregimeandnearly
50%ofthefoodgrainsaresiphonedofffromPDSsystem(NSSO,2011).
ButexpertsdisputetheNSSOsurveymethodologyusedinderivingthese
numbers.(JeanDreze,EPW)

Privatization
wrong

Itistruethatlargenumberoffarmersarenotbenefitedfrompublicprocurement,
butFCIhasnotopenedbranchesoutsideselectedregions.
So,insteadofprivatizingtheoperations,FCIshouldopenmoreofficesat
subdistrictlevel.

Poorsleft
out

Shantawantstoreducethecoverageoffoodsecurityactfrom67%populationto
only40%population.heprescribesthatpriorityhouseholdsshouldnotbegiven
cheapgrainsat1/2/3rupees.
Manypoorfamilieswillbedeprivedoftheirbasicrighttofood.
InsteadoflimitingthepopulationunderPDS,weshouldapproachuniversalPDS
i.e.everyonerichorpooreligibleforsubsidisedfoodgrains.
RecalltheWTODoharound10%Foodsubsidypeaceclausecontroversy.click

Bowingto
Imperial
Masters

Farmer
suicides

fordetailedarticle

ItseemsShantaKumarhastailoredhisnumberstopacifythefoodsubsidyquota
requirementsunderWTOsagreementonAgriculture(AoA),andModiObama
dealtoinfinitelycontinuepeaceclausewasjustaneyewash.
GiventheUPAstrendofannouncingbumperincreasesinMSPeachyearlarge
numberoffarmersgrowingriceandwheat.
ModididnotincreaseMSPforwheatandricesignificantlyafterassumingpower.
So,tocoverthosefarmerslossesandpreventanydistresssalesandsuicides,the
stateGovernmentannouncedhigherbonuspriceaboveMSPs.
NowShantarecommendsModinottodoopenendedprocurementfromsuch
states,abovebufferstocklimits.
Thiswillcatalyzedistresssellsandfarmersuicides.

DBTideaisflawed:
1. USAtoousessimilarfoodstampprogram,butmanypoorsmisusethefoodstampsfor
purchasingliquorandevennarcoticdrugs.
2. Whilefoodcanbesharedamongfamilymembers,cashcanbemisusedEvenifcashtransferred
toladyofthehouse,thereisnoguaranteeIndianhusbandwontbeatherup,lootthemoneyand
spenditondesiliquorandgambling.
3. Yes,BrazilMexicoandotherLatinAmericannationsuseConditionalcashtransfersbutnot
onlyasaSupplementandnotreplacementfortheirpublicdistributionsystem.
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4. SuchFreecashwillincreasebidiandgutkausageamongruralmenandwomeneverytime
theyvisitlocalkiranastore.Sometimesevenshopkeeperwilllurethemsayinghedoesnthave
chillarsotakethisguktapouch!(Counterargument:withRupaycardthechillarproblemwill
vanish,andfamilycanfullfiluseRupaycardevery45daystoclaimaccidentinsurance
Doublecounterargument:bankingpenetrationstilllowmanytribalfamiliesinremoteareaswill
beleftoutforthelackofJandhanaccountandoutlets)
Inshort,Cashtransfersarelikelytobringintheirtrailpredatorycommercialinterestsandexploitative
elements,eagertosellalcohol,brandedproducts,fakeinsurancepolicies,Saradhalikeponzischemes
orotheritemsthatwouldcontributeverylittletopeoplesnutritionorwellbeing.(JeanDreze,
Indianexpress)

Appendix:FCI:Presentstructure
Boardofdirectors

Mainbody

Daily
firefighting

1.
2.
3.
4.
5.

chairmanoftheboard
MDofCentralwarehousingcorporation
MDofFCI
3directorstorepresentunionministries
6directors
MDofFCIfromDelhiHQ
Chiefsof5zonaloffices
Chiefsof25regionaloffices.

Manpower ~25,000permanentstaffand~1lakhcontractualstaff.
NowletscheckShantaKumarsmajorrecommendationsonebyone:

MockQuestionsforCSAT
Q1:ConsiderfollowingPairsofCommitteevstheirofficialmandate:
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1. ShantaKumar:Restructuringofnationalfoodsecurityact,Middaymealandotherfood
distributionschemes.
2. UshaThorat:Grantinglicensestosmallbanks
3. NachiketMor:Grantinglicensestopaymentbanks
Whichofthemarecorrectlymatched?
a.
b.
c.
d.

Only1and2
Only2and3
Only1and3
allofthem

Q2.Findcorrectstatements
1. Nationalfoodsecurityactaimstocover65%ofIndianpopulation.
2. ShantaKumarCommitteerecommendsthisNFSAcoveragebereducedto50%ofIndian
populationonly.
3. BothAandB
4. NeitherAnorB
Q3.Arrangefollowinginthecorrectchronologicalorder
1.
2.
3.
4.

FCI
TargetPDSsystem
foodsecurityAct
NutrientBasedsubsidy(NBS)

Answerchoices
a.
b.
c.
d.

1234
1243
2143
4123

Q4.WhichofthefollowingsareoutsidethepurviewofAgricultureministry?
1. FCI
2. Minimumsupportpricestofarmers
3. Decentralizedprocurementsystem
Answerchoices
a.
b.
c.
d.

Only1and2
Only2and3
Only1and3
allofthem

Q5.PrivateEntrepreneursGuarantee(PEG)isadministeredby
a. Commerceministry
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b. Financeministry
c. Consumeraffairsministry
d. agricultureministry
Q6.OfficialmandateofFCIincludes
1. publicprocurementoffoodgrains
2. storageoffoodgrains
3. distributionoffoodgrains
Answerchoices
a.
b.
c.
d.

Only1and2
Only2and3
Only1and3
allofthem

Q7.WhichofthefollowingarerecommendedbyShantaKumarCommitteeonFCIrestructuring
1. FCIaloneshouldhandleallprocurementthroughoutIndia
2. CreateaseparateautonomousbodytoperformqualitychecksonthegrainsprocuredbyFCI
3. FCIscontractualstaffshouldbeconvertedintofulltimepermanentstaff.
Answerchoices
a.
b.
c.
d.

Only1and2
Only2and3
Only1and3
Noneofthem

Q8.WhichofthefollowingarenotrecommendedbyShantaKumarCommitteeonFCI
restructuring
1. CoverageofNationalfoodsecurityactshouldbewidened.
2. PriorityhouseholdsunderNFSAshouldbegivenmoregrainallotment
3. Antyodayahouseholdsshouldbegivengrainsat50%belowtheMSP
Answerchoices
a.
b.
c.
d.

Only1and2
Only2and3
Only1and3
Noneofthem

Q9.ShantaKumarCommitteeonFCIrestructuringhasrecommendedbuildingStrategic
reserveoffoodgrains.Underwhich
a. 5MMTgrainstobestoredinphysicalform
b. 5MMTgrainsequivalenttobestoredinforexcurrencyform
c. BothAandB
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d. NeitherAnorB
Q10.ShantaKumarCommitteeonFCIrestructuringhasrecommendedwhichofthefollowing
measures?
a. Toprovidelivelihoodtojuteindustrialworkers,FCImusttransportgrainsinonlyinjutegunny
bagsrightfromprocurementtoretaildistributionchain.
b. Toensureemploymenttomanuallaborers,FCIgodownsshouldavoidusagesofforkliftsand
othermechanizedinstruments.
c. BothAandB
d. NeitherAnorB
Q11.Forcashtransfer,whichofthefollowingarenotrecommendedbyShantaKumar
Committee?
1. Farmersbegivensubsidyonperhectarebasis.
2. DirectbenefittransfertoPDSConsumersmustberolledoutfirstinJ&KandNortheastwhere
leakagesaremaximum
3. Cashtransfershouldbemadeinthejandhanaccountofthepatriarchofthefamily
Answerchoices
a.
b.
c.
d.

Only1and2
Only2and3
Only1and3
Noneofthem

DescriptiveQuestionsformainsexamination:
1. Fromthefoodshortagesof1960s,Indiahasmovedintofoodsurplusesinpost2010period,but
somehowtheFCITPDShasnotabletodeliveronitsobjectivesveryefficiently.Critically
examinethereasonsandsuggestremedies.
2. Sinceitsinception,FCIsprocurementandbuffernormpracticeshavebeentonnagecentric
ratherthanfarmercentricorpoorcentre.DiscusshowithashurtIndianeconomyandpeople.
3. ShantaKumarCommitteehasaskedGovernmenttoreducethecoverageofNFSAintheinterest
offiscalconsolidation.Justifyyourstandonthisrecommendation.
4. Toprescribedirectcashtransferasthepanaceafortheillsofpovertyandhunger,isan
oversimplificationoftheproblem.Elaborate.
5. Decentralizationandprivatesectorparticipationisessentialforefficientmanagementof
procurementandpublicdistributionsystemofModernIndia.Elaborate.
6. DefineFoodsecurityandlistthemeasurestakenbyGovernmentofIndiatoensurefoodsecurity
inIndia.
7. (interview)ApartfromwhatShantaKumarrecommended,whatothersuggestionswouldyou
makeforreformingPDSsysteminIndia?WhatifwesimplyprivatizeFCI?
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