To clean up FCI rot, Govt asks for action plan from McKinsey

McKinsey has been given a deadline of six months to submit its report. This was confirmed by Minister for Consumer Affairs, Food and Public Distribution Sharad Pawar at the social editors’ conference in New Delhi today.

The economics of handling grains by the FCI is seen to be completely twisted, draining the public exchequer. Currently, the operational cost that includes procurement, storage and transportation of wheat per quintal is Rs 952 and for rice is Rs 1254. The subsidy per tonne is wheat is Rs 357 per quintal and for rice is Rs 482 per quintal.

In addition to this, is the grain lost, worth crores, because of poor storage and transit facilities. This decision to hire McKinsey is even more significant in the light of the storm created by the Left parties on foreign consultants for policy issues in the Planning Commission recently. Government sources say that this would help them keep the promise made in the National Common Minimum Programme to ‘‘bring major improvements in the functioning of the FCI to control inefficiencies that increase the food subsidy burden’’. There have been earlier studies on the FCI that suggested remedial measures: the report of the High-Level committee on Long Term Grain Policy by Abhijit Sen submitted in July 2002 and one by the Hyderabad-based Administrative Staff College in May 2001. One of the decisions flowing from these recommendations was to allow FCI to access cheaper market borrowings as compared to obtaining credit from a consortium of banks at a high percentage. The other was to cut down on open-ended procurement by FCI, thus keeping the stocks to meet buffer-stock needs and targeted-scheme requirements, cutting down on storage costs.