According to Report of the Comptroller and Auditor General of India on Performance Audit of Storage Management and Movement of Food Grains in Food Corporation of India, Report no.-7 of 2013-Union Government (Ministry of Consumer Affairs, Food and Public Distribution),
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• Procurement of foodgrains increased from 343 lakh metric tonne (LMT) to 634 LMT during the period 2006-07 to 2011-12. As a result, stock of foodgrains in the Central Pool also went up from 259 LMT on 1 June 2007 to 824 LMT on 1 June 2012. Such a sharp increase in foodgrains stock raises issues relating to storage space and larger movement of foodgrains from procuring states to consuming states. Considering the widening gap between stock of foodgrains and available storage capacity as well as the constraints being faced in movement of foodgrains, Audit decided to examine the storage management and movement of foodgrains in Food Corporation of India (FCI).
• The Audit revealed that average foodgrains procurement of 514 LMT during the period 2006-07 to 2011-12 was lower than the average allocation of 593 LMT made by the Government of India (GoI) to states for distribution under Targeted Public Distribution System (TPDS) and Other Welfare Schemes (OWS). The current procurement level of foodgrains by FCI, State Government Agencies (SGAs) and states undertaking decentralized procurement (DCP) would not be able to adequately meet the allocation and the future requirement of foodgrains estimated by the GoI.
• The minimum buffer norms prescribed by the GoI did not clearly delineate individual elements of food security (e.g. emergency, price stabilization, food security reserve, TPDS, OWS) within the minimum buffer stock. The existing norms also did not specify the maximum and manageable level of stock to be maintained in the Central Pool and the components therein.
• Under the existing buffer stock policy, the total stock of foodgrains held by FCI, State Governments and their agencies constitute the Central Pool. The policy does not indicate the agency which is primarily responsible for maintaining minimum buffer stock level for India as a whole. There are many agencies involved in storing foodgrains of the Central Pool which adversely affects accountability and transparency in the management of foodgrains.
• No specific norm was followed for fixing of the Minimum Support Price (MSP) over the cost of production. Resultantly, it was observed that the margin of the MSP fixed over the cost of production varied between 29 percent and 66 percent in case of wheat, and 14 percent and 60 percent in case of paddy during the period 2006-07 to 2011-12. Increase in MSP had a direct bearing on statutory charges levied on purchase of foodgrains by different State Governments. There were also wide inter-state variations both in statutory and non-statutory charges being charged by the State Governments. All this resulted in the rising of the acquisition cost of foodgrains.
• FCI owned storage capacity remained more or less constant ranging between 151 LMT and 156 LMT during the period 2006-07 to 2011-12. The foodgrains stock in the Central Pool steadily increased to 824 LMT on 1 June 2012. As a result, hiring of storage space by FCI increased from 100 LMT to 180 LMT during the period significantly adding to hiring charges from Rs. 322 crore in 2006-07 to Rs. 1119 crore in 2011-12. Further, due to constraints in available storage capacity, FCI could not take over stock of wheat procured by State Governments Agencies for the Central Pool within the prescribed time frame of June each year. This led to increase in payment of carry over charges to State Government Agencies from Rs. 175 crore in 2006-07 to Rs. 1635 crore in 2011-12 for holding of foodgrains beyond the prescribed time.
• The storage gap in FCI against the Central Pool stock witnessed a steady increase during the period 2006-07 to 2011-12. Against the storage gap of 332 LMT (March 2012), GoI/ FCI envisaged capacity addition of only 163 LMT during the 6 year period under various augmentation programmes. Out of this, only 34 LMT was completed (March 2012).
• FCI did not consider day-wise requirements and operational constraints of their own loading points in field offices in its monthly movement plan conveyed to the Railways in a number of cases. At the same time, due to operational constraints, Railways could not supply rakes as per plan of FCI and did not also adhere to the date-wise and destination-wise plan of FCI. Resultantly, during the period 2006-07 to 2011-12, the shortage of railway rakes with reference to planned ranged from 6 percent to 17 percent.
• Internal audit and physical verification conducted by FCI was largely inadequate. Substantial shortfall of manpower in internal audit wing had adversely affected the internal audit system in FCI. Internal audit and physical verification arrangements followed by FCI lacked the requisite independence and effective follow up at the headquarters level.
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