Issues related to direct and indirect farm subsidies and MSPs

India’s combined food, fuel, and fertilizer subsidiesamount to 30% of all

government subsidies, and 2.5% of the GDP.

Direct Subsidies
 Direct subsidies are money transfers by government which reach
benefeciaries through a pre-dermined route
 Merits
o Governance-
 Reduced leakage, and checking corruption,
 Regular monitoring and effectient delivery of benefits
o Farmer centric-
 Reduced usage of excess inputs like fertilizers etc..,
 Prevent one size fits all approach,
 Improvement in farm eqipments,
 Diversification of income sources
 Demerits
o Use of money for non-productive purposes (eg. alcohol, marriage)
o Might lead to inflation as farmers have more money with them
o low penetration of Aadhar and Digital still poses challenges of
curbing prilferage

Indirect Subsidies
 These are subisidies which are provided to farmer indirectly like input
cost reduction (fertilizer subsidy), interest subvention, price reduction
etc.
 Merits
o They are for steering development of a targeted priority area
o Knowledge enhancement of farmers through tech and training
o Incentivize farmers to use better inputs for higher productivity
 Demerits
o This leads to biased development of few crops (rice, wheat),
regional differences (eg. HYV seeds are bought by areas having
good irrigation facilities)
 Increasing focus on pulses, vegetables etc. to remove such
imbalances
o Fertilizer subsidy- Issues covered separately
o Prilferage still remains issue
 Increasing penetration JAM trinity
o Power subsidy lead to excessive discharge of ground water-
 Separate feeder services to ensure electricity availability for
limited time

Fertilizer subsidies:

Issues with subsidies:

 Total outgo of fertilizer subsidy alone for 2017-18 stood at 70K Cr
  Fertilizer subsidies in India are given not to the farmers but to companies
that make fertilizers, so that they sell fertilizers to the farmers at a
reduced price
 Estimates show that more than a third of the subsidy benefits the
fertilizer companies instead of the farmers
 Research shows that only about 50% of the overall subsidy reaches small
and medium farmers, and
 Most of the fertilizer subsidy is cornered by farmers of Haryana, Punjab,
Western UP
 Correct proportion in which fertilizers should be used is 4:2:1 for NPK.
However, subsidized urea (at less than half the actual price) leads to
overuse of urea and underuse of P and K (8:3:1)
 Excessive fertilizer use also leads to ground water contamination,
eutrophication by waste water of farms
Possible solutions:
 Subsidies should be made direct cash transfers with less price regulation
 Farmer awareness and increased usage of Soil Health Cards, organic
farming etc.
 Reducing subsidy on urea to reduced excessive Nitrogen content and
increase adoption of environment friendly Neem-coated Urea
 Decentralization non-point source pollution controlling measures

Minimum Support price:

Definition of various prices:

• MSP- Generally announced at sowing time, and the government agrees to
buy all grain offered for sale at this price
• Procurement prices- Higher than MSPs, usually prices at which govt. buys
for PDS and FCI buffer stocks
• Issue prices-prices at which the Government supplies food grains through
Fair Price shops and ration depots.
• FRP (Fair and Remunerative)-is the minimum price which the buyers of
agri goods (eg. sugar mills)have to pay to the farmers for their produce
(eg. sugarcane)

Who, what and How:

Commission for Agricultural Costs and PricesCACP set in 1965 is an attached
office under Agriculture ministry (headed by IAS). CACP submits its
recommendations every year to the government and Cabinet Committee on
Economic Affairs(CCEA) (headed by PM) finally decide the price.

As of now, CACP recommends MSPs of 23 commodities (FRP for sugarcane),

which 14 Kharif Crops, 6 Rabi crops, sugarcane, copra and raw Jute
Kharif (July- October)
 Mnemonics- (C MSG RAM with MS. SUNita)
 Crops- Cotton, Millets (Jawar, Bajra, Ragi), Soyabean, Groundnut, Rice,
Arhar (tur/ pigeon pea), Maize, with Mung, Sunflower, Urad, Sesamum,
Nigerseed
Rabi (November-March):
  Mnemonics- WBC LO toh Mustardaur Safflowerka juice piyo
 Crops- Wheat, Barley, Chickpea/Gram, Lentil/Masur, Oats, Mustard,
Safflower
Other crops- Sugarcane, Copra, Raw Jute
Note: MSP for dehusked coconut based on MSP of copra and toria based on MSP of
mustard.Also, No is MSP issued for OATs (just fitting in mnemonic but it’s a rabi
crop).

MSP calculation methods-

• A2- Actual cost paid by farmer for various inputs like seeds, fertilizers
• A2+FL- Actual cost plus notional family labor cost
• C2- Comprehensive cost i/c actual+ notional (family labor, rent of land,
interest on capital etc.)

Objectives/Positives of MSP:
 Assuring remunerative and relatively stable price environment
o Injects an element of certainity and confidence in farmers
o Price failure can push farmers in worst cycle of poverty leading to
issues like suicides
 Improving economic access of food to people
o If prices of a particular crop falls aharply in a particular year and
farmer is not paid well, it will lead to shortage of that crop in next
year putting additional import burden on government
 Envolving a production pattern in line with country’s need
o MSP has been successful in making India self-sufficient

Problems with MSPs:

 About 1.2% of the GDP (1.7 L Cr in 2018-19) is food subsidies which also
has adverse effect on investments
 Nearly half of all subsidy spending goes towards food subsidy (meeting
the difference between the cost of staple foods (rice, wheat, and
lentils), and the artificially low CIPs)
 Almost 80% of public expenditure in agriculture is in form of subsidies
and only 20% as investments.

 MSPs are lower than MS Swaminathan Commission (Link)

 MSPs should be set using the CACP determined ‘C2+50%’ cost, as
suggested by MS Swaminathan Commission. DowntoEarth Analysis
shows that MSP is less than 1.5C2 (Rs35-2500 depending upon crops)

 Regional imbalance in favour of relatively well-off producer states:

 All states produce wheat but 95% procurement is from Punjab,
Haryana, West UP
 20 states produce rice but 90% is procured from Punjab, Haryana,
UP, AP, Tamil Nadu
  Also, One Nation, One MSP doesn’t work due to input (electricity, water,
labor cost) variation across the states

 Strangles private trade, and subsidizes inefficient FCI: In states such as

Chhatisgarh and Punjab which have well functioning govt. procurement
leaves hardly anything for market sale and thus leading to release of food
grains at lower price. (Eco-survey 2018-19)

 Distorts crop production incentives: The exclusive attention to wheat

and rice has distorted the cropping pattern of farmers in their favour. The
higher water and fertilizer intensity of these two crops in turn has had
adverse environmental impacts

 At many instances small and marginal farmers are unaware of MSP prices
and poor rural transport and infra provides further stumbling block.

Way forward:
 FCI reforms- In the long-term, procurement and distribution operation
should be progressively decentralized, to reduce costs incurred on FCI
operations; FCI should increasingly become a coordinating body
 Revamping open ended procurement policy to selective targeting.
 Better targeting through JAM- ensuring small and marginal farmers get
the benefit
 Diversification of food subsidies beyong MSP- schemes like PM-ASHA for
pulses should be used more frequently
 Debate on removing One Nation, One MSP is need of hour

Govt. initiatives to reduce regional biasis:

 Water conservation- FasalSeenchayiYojana, System of Rice intensification
etc.
 Organic farming- National Mission of Sustainable Agriculture
 Technology mission for North Eastern states (Horticulture)
 Crop diversification programme under RsahtriyaKrishiVikasYojana to
divert area from paddy to pulses, coarse grains etc.
 FasalBeemaYojana

Food subsidies and WTO:

Uruguay Round created two categories of domestic support:-

 Green Box: exempt from reduction commitments. It includes govt.
subsidies on research, education, pest control etc. and volume decopouled
payments to producer.
- For developing countriesspecial treatment is provided in respect of
governmental stockholding programmes for food security (but
that must not invove price support to producer unlike MSP in Indian
PDS or direct customer payments)
 Amber box subsidies- subsidies that distort the international trade by
making products of a particular country cheaper as compared to same or
similar product from another country is slotted under this box.
- De Minimis:-there is no requirement to reduce trade-distorting domestic
support in any year in which the aggregate value of the product-specific support
does not exceed. It is 5% of agriculture production value in 1986-88 for
developed countries and 10% of value in 1986-88 for developing
countries. Key argument is that prices being considered are 3
decades old!
 Blue box subsidies- These are basically Amber Box subsidies but they tend to limit
the production. So generally, no one has any issues with these!

Peace Clause- Art 13 of AoAcannot be challenged by other WTO Members on

grounds of being illegal under the provisions of another WTO agreement. Which
gave buffer amount of 10 years to countries to implement subsidiy limits etc.
This was over after 2004 but At Bali WTO conference in 2013, it has been
extended for 4 years (but it’s still operational as no agreement could be reached
among countries). Also, countries agreed to find a permanent solution to public
stockholding by developing countriues for food security.

2015 Nairobi package:

- eliminate agricultural export subsidies. Developed countries to
eliminate immediately, except for a handful of agriculture products, while
developing countries to end it by 2018.
- Special Safeguard Mechanisms (SSG): impose an additional duty in
case of import surge

Agreement is heavily loaded in favour of developed countries due to

following reasons
- A developed country might need only 1-2% of its GDP to subsidise 50% of
its agriculture.
- USA use 1/3rd of its Agriculture GDP in green box subsidies and such
distorations are not addressed.
- Post Uruguay (1994-98), the export of agricultural products from Asia
actually declined steeply to 0.5% from 8.2% in 1990-94. For India, the
share in 1990-91 was 18.5%, it fell to 2.2% in 2015-16.
- Developed countries also make use of Agreement on Sanitary and
Phytosanitary Measure (SPS) and Agreement on Technical Barriers
to Trade (TBT) to selectively ward off imports from developing countries
by imposing higher standards than those imposed by international bodies

PDS- objectives, functioning, limitations, revamping

PDS is a government sponsored chain of shops entrusted with distribution of

food and non-food commodities at a cheap price to the needy section of society

Objectives of PDS:
 Ensure essential consumer goods availability at cheap price
  Insulating the citizens from increasing inflation
 Ensure minimum nutritional status in country
 Indirect control of open market prices of goods

Key PDS schemes (functioning)

 Targeted PDS (TPDS)-
 Special targeting of poor 6 Cr families
 Antodaya Anna Yojana (AAY)
 Covers poorest of poor (2.5 Cr people)
 35 kg/month food at very cheap prices (Rice @ Rs 3/kg, wheat @
Rs 2/kg)
 National Food Security Act
 5kg/month to selected few (82 Cr)- details ahead
 OWS- ICDS, MDM

Functioning and Limitations:

Under PDS govt. runs TPDS and Other Welfare schemes (OWS- ICDS, MDM etc.) ,
procured grains are supplied to consumers at CIPs via about 5 lakh FPSs; CIPs
are uniform all across the country. Through PDS 6 commodities (rice, wheat,
flour, sugar, edible oil, soft coke, kerosene oil) are supplied by central govt.
Additionally, state govts. add a few stuff like salt, matchsticks etc. based on local
demands.
 While MSP has been rising (rich farmer lobby), CIP has been frozen
(populist measure). Beyond the MSP, government also spends about 35%
extra on other incident and distribution costs; this is proving to be huge
fiscal burden for central govt.
 About 47% of all foodgrainsare leaked before they reach the
beneficiaries(Shanta Kumar committee.)
 Even among the beneficiaries who get the grains, targeting is poor. Many
states haven’t done proper exercises to identify BPL families.
o Additionally, migrants, landless without resident proof are not able
to get ration cards
o As per Right for Food campaign (Jharkhand), many eligible
households are being deprived of ration cards (due to bogus ration
cards- limit of 75% under NSFA).
 Aadhar- PDS card llinkageand Internet connectivity of EPOS machines is
another challenge
 FCI operational inefficiencies due to poor technology, over-
bureaucratization, lack of coordination with state govts. lead to wastage
of food grains
 Artificial food inflation due to overstocking

TPDS (X)
 Key features
o Targetting- BPL (<15000 pa) and AAY at very low prices wrt APL
o Dual prices- BPL at 50% of FCI economic cost, APL at 100%
 o Central state control- in case of PDS central govt. only supply 6
commodities to state, rest is managed by state while TPDS is led by
central govt.
 Issues
o Targetting BPL- <15000 pa leaves a lot of vulnerable outside
o Identification as per target- erroneous inclusions and exclsuions
o Ghost ration cards
o Leakages
o Shift from surplus to deficit states has reduced due to increased
bracket size of beneficiaries

Revamping: (Shanta Kumar Committee)

 Procurement
o States with enough PDS experience (Haryana, AP) should be
encouraged to directly procure from farmers
o FCI should shift focus to states where sale is at prices lower than
MSP like Assam, WB, East UP
o Private sector involvement in procurement, storage, transport
should be encouraged
o Negotiable Warehouse receipt(NWR) system should be scaled
 Supply
o GoI should expand its commodities bracket to make food more
nutrient rich
o Transparent liquidation policy to avoid wastage of surplus stocks
o GIS mapping of beneficiearies and Fair Price shops (FPS) can help
reduce leakage
o FPS operations should be made more inclusive by incorporating
SHGs, cooperatives, GPs
o Use of technology such as e-PDMScovering the entire food
supplychain, monitoring of FPSs via CCTVs, GPS tagging of trucks
used to transport food, computerized records of grain availability
at various places, smart biometric cards (UIDAadhar cards) to
make payments at FPSs etc.
 Constumer
o Food coupons and DBT can be explored
o DBT using JAM trinity
o Toll free helpine for grievance redressal
o Reduce beneficiaries to 40% (shanta kumar)

Universal PDS
 Positives- Less exclusion error,
 Negatives- Cost, North African experiments suggests no significant benefit
to poor, Price

Issue of buffer stock and Food Security

Buffer stock is a system or scheme to procure excess foodgrains at times of good
harvest to prevent falling of prices below a target range and releasing of grains in
case of bad harvest to keep inflation of food prices in check.
Total operational stock of FCI include stocks earmarked for PDS (TPDS + OWS
(MDM, ICDS etc.)) and stocks needed for food security.

There are several problems with this situation of high procurement and rising
stocks:
 Open ended Procurement- In 2016-17 govt. ended up buying 30%
marketable surplus of wheat. Buffer stocks have become a tool to manage
too many interlinked objectives of fair price, food security, keeping
inflation in check leading to inefficient operations
 Central procurement should have a limit; it shouldn’t keep
following the policy of acquiring unlimited amount of grain at the
announced MSP
 Inefficient inventory management
 Counter cyclic operations- Higher stocking in a bad crop year to
ensure supply for TPDS and OWS further strains the open market
operation
 20-25% food is wasted in post-harvest loses
 Increasing gap between per capital production v/s per capita
availability
 Ad-hoc liquidation policy (Shanta Kumar)
 Need for streamlined policy-
 Open market sales for domestic market
 Exports to foreign countries as per trade policy.
 Inferior quality grains can be sold at a reserve price as
animal feed.
 The cost of these stocks, calculated at economic cost plus the cost of
carrying the buffer, would come to nearly Rs 100,000 crore.This
illustrates the extent of economic inefficiency in the system
- Coverage under NFSA should be brought down to about 40%
(currently 67% current system actually hurts the BPL families by
reducing their entitlement to 5 kg/ person from 7 kg (Shanta Kumar)
- The central government should discourage state governments from
announcing bonuses on top of the announced
MSP/FRPs(C.Rangarajan panel) ,
- Also, Forex reserves are high and even to tide over a really bad
harvest, even if India were to buy 10mt of wheat, it would cost only
about 1.5% of India’s forex reserves. So, buffer stock amount can be
rationalized

Is Food Security a challenge

FAO report on The State of Food Security 2001 defines it as situation when all
people at all time have access to sufficient, safe and nutritious food for an active
and healthy life

Steps for food security

 Sufficiency- MSP, PDS (FCI), Buffer stock
  Nutritious- ICDS, MDM

State of Food Security in India

 Quantitative needs- India produces net ~280 Mntonne of food grain in
2018 which is provides sufficient per-capital food production but food
availability per capita varies between 450- 500 g/day. This fluctuations
show that food security is quanitiatively an issue in India
 Qaualitative needs
o Undernourishment- ~14%, (FAO)
o Stunting- 38% (FAO)
o 53% women (15-49) are anemic (NFHS-4)
o Global Hunger Index (IFPRI) ranks India below 100
o Global Food Safety index ranks India 79 out of 113 which is low.
 Issues that cause the gap
o Poverty leads to lower demand
o Illegal practices hoarding etc.
o Lack of proper liquidation policy
o Post harvest loses (@ 20-25%)
o Absence of NAM
 Causes of post harvest losses
o Packaging
o Un-availability of temperature controlled vehice (only 10% fruits
use cold storage transport)
o Inefficient supply chain- demand supply mismatch

NFSA
 Who are the beneficiaries :Legal food security to 67% population (States
to identify eactly who) 75% urban and 50% rural
 Max 5kg/person per month to elgible beneficiaries (Rs 3/kg- wheat, Rs
2/kg- Rice, Re 1/kg coarse grains),
 Continuation of 35 kg per household under Antodaya Ana
Yojanabenfeciaries
 Issues- Cost (1.3% of GDP), Benefeciaries identification, increasing
production, Rise of leakages

Storage, transport, and marketing of agricultural produce and issues and

related constraints

Storage:
India produces about 280mtof foodgrains per year. However, losses have
remained stuck at around 10%, which means that losses are also increasing with
increasing production. 6% of all losses happen at the storage stage. Storage
structure design and its construction play a vital role in reducing or increasing
the losses during storage.

In India, the major part of production (about 70%) is stored at farmer level,
and is the root cause of high storage losses. We should encourage use of coal-tar
drum bins, domestic hapur bins, etc. for farmer-level storage, and pusa bins for
farmer-level storage.

Bulk storage responsibility lies with FCI, Central Warehousing Corporation,

State Warehousing Corporations, etc. Existing storage capacity with FCI and
state agencies for central pool stocks is about 72mt, of which15 mt (20%!) is CAP
(cover and plinth, which just means outdoor stacks of grain covered with some
waterproof material).

 FCI should expedite the outsourcing of storage function to CWC, SWCs,

and the private sector via the PEG(Private Entrepreneurship
Guarantee) scheme(under which private sector players are allowed to
earn rent plus a guarantee on their warehouses, when they’re being used
for bulk storage by the government)
 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, wherever possible, should replace
CAP, with potential help from the private sector
 Negotiable Warehouse Receipt System (NWRS) should be taken up on
priority basis, and scaled up quickly. Under this, farmers can deposit their
produce to the registered warehouses, and get, say, 80 percent advance
from banks against their produce valued at MSP. They can sell later when
they feel prices are good for them. This will bring back the private sector,
reduce massively the costs of storage to the government, and be more
compatible with a market economy
 GoI can encourage building of warehouses with better technology, and
o e-track levels of stocks on a regular basis
o For scientific storage, drying of food grains to a safe moisture
level is essential;
 We should tap into FDI and financing from ADB, IFC etc. for creating
storage infrastructure.
 Targeted beneficiaries can be given 6-month rations in one go; this will
save on storage costs, as well as transaction costs for the beneficiaries

Transport/ Movement of agriculture produce:

In order to ensure availability of foodgrains for TPDS and OWS (other welfare
schemes), and to maintain reasonable levels of buffer stocks at various strategic
locations throughout the country, and to reduce the strain on existing storage
capacity,FCI undertakes transportation of foodgrain (wheat and rice) from
surplus States to the deficit States and also within the States by rail, road and
riverine modes. About 90% is undertaken by railways and rest by road and
waterways.

CAG report says that the main reasons for inefficiencies in movement of food
grains were deficient monthly movement planning, unplanned/unscheduled
supply of rakes and dispatch without proper assessment of requirement at the
consignee end, delay in loading and unloading of railway wagons, and
weakness in existing system of claim settlement. To overcome these, CAG
recommended that there be better coordination between the FCI and railways.
Movement of grains needs to be gradually containerized which will help
reducetransit losses, and have faster turn-around-time by having more
mechanized facilities at railway sidings. Using inland waterways and hinterland
ports could be further explored, especially from coastal states with a net surplus
etc.

HLC also 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

Invite FDI in construction of modern silos and grain movement through

containers. Railways need to be encouraged to open it for private sector, both
domestic and foreign. Scarcity of storage space and lack of timely availability of
railway rakes is a major bottleneck in movement of grains in time

Marketing of agricultural produce:

Agricultural marketing covers the services involved in moving an agricultural

product from the farm to the consumer. Due to the involvement of various levels
of middlemen, the actual producers of food get the lowest price in the entire
chain, while the consumers pay the highest.

Presently, markets in agricultural products are regulated under the APMC Act
enacted by State Governments. There are about 2,500 principal regulated
markets in India (!). The Act covers not only cereals, pulses etc., but also
chicken, goat, fish etc.,

The purpose of state regulation of agricultural markets was to protect farmers

from the exploitation of intermediaries and traders and also to ensure better
prices and timely payment for their produce.

Over a period, markets have become restrictive and monopolistic markets,

providing no help in direct and free marketing, organized retailing and smooth
raw material supplies to agro-industries.
• Exporters, processors and retail chain operators cannot procure directly
from the farmers and says that the first sale of these commodities can
be done only through the commission agents licensed by APMC Act.
• Various taxes, fees/charges and cess levied on the trades conducted in
the Mandis are also notified under the Act in the process, an enormous
increase in the cost of marketing and farmers end up getting a low
price for their produce. APMCs charge a market fee from buyers, and a
licensing fee from commissioning agents who mediate between farmers
and buyers. States also impose their own VAT and other levies. Such high
taxes at the first level of trading have significant cascading effects on the
prices as the commodity passes through the supply chain, and hence the
consumers end up paying a much higher price than what the farmers
receive (for rice and wheat, such levies are 10-15% of the cost). These
taxes vary widely between states- from 20% in AP for rice, to near zero
in Maharashtra and Gujarat.
Model APMC Act 2017: Since various State APMC Acts created 2,500 fragmented
markets for agricultural commodities and curtailed the freedom of farmers to
sell their produce other than through the commission agents, the centre has
drafted a model APMC and has been urging States to adapt it. It provides for:

 Defined each state/UT as a single unified market area.

 Establishment of consumers’ and farmers’ markets to facilitate direct sale of
agricultural produce to consumers
 Permits private persons/growers/local authoritiesto establish new
markets for agricultural produce in any area
 Requires a single levy of market fee on the sale of agricultural commodities
 Replaces licensing of market functionaries to allow them to operate in one or
more different market areas
 Provides for the creation of marketing infrastructure from the revenue
earned by the APMC
 Proposes to put a cap on mandi taxes at 1% for foodgrain and 2% for fruits
and vegetables as well as commission agent’s levy at 2% of the total
transaction
 Publicizing data on arrivals and rates of agricultural produce brought into
the market area for sale

Provisions of the model APMC act can lead to greater competition. Since
Agricultural marketing is a state subject, any changes need to be made with
respective states. Many of the States have partially adopted the provisions of
model APMC Acts and amended their APMC Acts. Some of the states, however,
have not; this indicates hesitancy on the part of state governments to liberalize
the statutory compulsion on farmers to sell their produce through APMCs.

Inadequacies of the Model APMC act:

 Even though the model APMC act allows for direct selling, it retains the
mandatory requirement of the buyers having to pay APMC charges even when
the produce is sold directly outside the APMC area, say, to the contract
sponsors or in a market set up by private individuals even though no facility
provided by the APMC is used. This would render private players
uncompetitive, as they will need to charge APMC levy on top of their service
fee (grading, loading, weighing, storage etc.) and desired profit
 Though the model APMC Act bars the APMCs and commission agents from
deducting the market fee/commission from the seller, the incidence of these
fees/commission falls on the farmers since buyers would discount their bids
to the extent of the fees/commission charged by the APMC and the
Commission agents
 The provisions of the Model APMC Act do not go far enough to create a
national common market for agricultural commodities. In fact, market may get
more fragmented
 Many large states like UP have not enacted the act.

Suggestions:
 States should be guided to drop fruits and vegetables from the APMC act; this
could then be followed by more commodities, until in the limit all
commodities are dropped
 State governments should be persuaded to provide support for setting up
infrastructure (warehousing, cold storage etc.), land allotment etc. for markets

Other issues with marketing

 Warehousing and transportation issues covered above
 Lack of gradation and standardization of multiple goods
 Intermediaries
 APMC issues- covered above
 Market information gap
 Supply chain issues

Streamlining the FCI

Food Cooperation of India

FCI - set up by Food Cooperation Act 1964. HQed at Chennai. It works under
Consumer Affairs ministry. 3 key Objectives:
 Ensuring remunerative prices to farmers (MSP/FRP)
 Ensuring food security by strategic buffer stocks
 Ensuring access to affordable food to consumers (state run PDS)

Shanta Kumar Committee recommendations

 Procurement
o Handover procurement to experienced states (AP, Haryana) and
focus on states with poor operations
o MSP to be reviewed to make it more diversified which currently
skewed towards rice and wheat
o Trade policy to ensure that landed cost of imported crops is not
lower than MSP
 Storage and movements of grain should be slowly outsourced to CWC and
SWCs, and private sector participation should be encouraged
 PDS and NFSA
o DeferingNFSA implementation in states who have not identified
beneficiaries
o Reducing beneficiary cover from 67% to 40% to reduce fiscal
burden
o Gradual introduction of DBT starting with 1Mn+ cities
 Buffer stock and liquidification
o Transparent liquidfication policy is need of hour. Current policy is
ad-hoc, slow and cost the nation a lot
 Labor issues
o Increase mechanization to reduce to manual labor at offices
o Top level executives from private sector
o Daily wage contractual labor wherever possible
 Cross- cutting
 o The entire food management system should undergo end-to-end
computerization

The new face of FCI should be akin to an agency for innovations in Food
Management Systemwith a primary focus to create competition in every
segment of foodgrain supply chain