AECO 242 :: Lecture 07 :: WAREHOUSING AND FOOD CORPORATION OF INDIA

Warehousing 
Meaning and Functions
            Warehouses are scientific storage structures especially constructed for the protection of the quantity and quality of stored products. Warehousing may be defined as the assumption of responsibility for the storage of goods. It may be called the protector of national wealth, for the produce stored in warehouses is preserved and protected against rodents, insects and pests, and against the ill-effect of moisture and dampness.
            The warehousing scheme in India is an integrated scheme of scientific storage, rural credit, price stabilization and market intelligence and is intended to supplement the efforts of co-operative institutions. The important functions of warehouses are:
            1. Scientific Storage: Here, a large bulk of agricultural commodities may be stored. The product is protected against quantitative and qualitative losses by the use of such methods of preservation as are necessary.
            2. Financing: Warehouses meet the financial needs of the person who stores the product. Nationalized banks advance credit on the security of the warehouse receipt issued for the stored products to the extent of 75 to 80 per cent of their value.
            3. Price Stabilization: Warehouses help in price stabilization of agricultural commodities by checking the tendency to making post-harvest sales among the farmers. Farmers or traders can store their products during the post-harvest season, when prices are low because of the glut in the market. Warehouse helps in staggering the supplies throughout the year. They thus help in the stabilization of agricultural prices.
            4. Market Intelligence: Warehouses also offer the facility of market information to persons who hold their produce in them. They inform them about the prices prevailing in the period, and advise them on when to market their products.
            This facility helps in preventing distress sales for immediate money needs or because of lack of proper storage facilities. It gives the producer holding power; he can wait for the emergence of favourable market conditions and get the best value for his product.
Types of Warehouses
            Warehouses may be classified on two bases:
1. On the Basis of Ownership
            (a) Private Warehouses: These are the warehouses which are owned by the government and are meant for the storage of goods of any member of the public against a prescribed storage charge. The method of operation and the charges for storage are regulated by the government.
            (b) Bonded Warehouses: These warehouses are specially constructed at a seaport or an airport and accept imported goods for storage till the payment of customs by the importer of goods. These warehouses are licensed by the government for this purpose. The owner of the warehouse gives an undertaking to the government that customs duty will be collected from the person before he is allowed to remove the goods from the warehouse. In other words, the goods stored in this warehouse are bonded goods. They may be owned by the dock authorities or privately-owned; but they have to work under the close supervision and control of the customs authorities. The following services are rendered by bonded warehouses:
            (i) The importer of goods is saved from the botheration of paying customs duty all at one time because he can take delivery of the goods in parts.
            (ii) The operation necessary for the maintenance of the quality of goods – spraying and dusting, are done regularly.
            (iii) Entrepot trade (re-export of imported goods) becomes possible. The importer may take delivery of the goods without paying the customs duty if they are to be re-exported. He is thus saved from the botheration of first making the payment of customs duties on imported goods and then getting a refund on re-exported goods.
2. On the Basis of Type of Commodities Stored
            (a) General Warehouses: These are ordinary warehouses used for storage of most of foodgrains, fertilizers etc. In constructing such warehouses no commodity-specific requirement is kept in view.
            (b) Special Commodity Warehouses: These are warehouses which are specially constructed for the storage of specific commodities like cotton, tobacco, wool and petroleum products. They are constructed on the basis of the specific requirements of the commodity.
            (c) Refrigerated Warehouses: These are warehouses in which temperature is maintained as per requirements and are meant for such perishable commodities as vegetables, fruits, fish, eggs and meat. The temperature in these warehouses is maintained below 30o to 50oF or even less, so that the product may not get spoiled by high atmospheric temperature.
Warehousing in India
            In 1928, the Royal Commission on Agriculture underscored the need for a warehousing system in India. The Central Banking Enquiry Committee, 1931, too, drew attention to this need. The Reserve Bank of India emphasized the need for warehouses as early as in 1944, and proposed that every State Government should enact legislation to regulate the functioning of warehouses. The All-India Rural Credit Survey Committee of the Reserve Bank of India (set up in 1951 and submitted its report in 1954) also made comprehensive recommendations for the development of warehousing as an integrated scheme of rural credit and marketing. As a result of the recommendations of the Committee, the Government of India enacted the Agricultural Produce (Development and Warehousing) Corporations Act, 1956. The Act provided for:
            (a) The establishment of a National Co-operative Development and Warehousing Board (which was set up on 1st September, 1956);
            (b) The establishment of the Central Warehousing Corporation (which was established at Delhi on 2nd March, 1957); and
            (c) The establishment of State Warehousing Corporations in all the States in the country (which were established in various states between July 1957 and August 1958).
            In 1962, the Government of India decided to break up the Act of 1956 into two separate Acts – the National Co-operative Development Corporation Act, 1962, and the Warehousing Corporations Act, 1962. The Warehousing Corporations Act came into operation on 18th March, 1962. The Act defines the specific functions and the area of operations of Central and State Warehousing Corporations. It enlarged the list of the number of commodities meant for storage.
(a) National Co-operative Development and Warehousing Board
            This board was set up on 1st September 1956 to perform the following functions:
            (i) To advance loans and grants to State Governments for financing co-operative societies engaged in the marketing, processing or storage of agricultural produce, including contributions to the share capital of these institutions;
            (ii) To provide funds to warehousing corporations and the State Governments for financing co-operative societies for the purchase of agricultural produce on behalf of the Central Government.
            (iii) To subscribe to the share capital of the Central Warehousing Corporation and advance loans to State Warehousing Corporations and the Central Warehousing Corporation;
            (iv) To plan and promote programmes through co-operative societies for the supply of inputs for the development of agriculture; and
            (v) To administer the National Warehousing Development Fund.
            In March 1963, the Board was converted into the National Co-operative Development Corporation (NCDC), and its functions were limited to co-operative development.
(b) Central Warehousing Corporation (CWC)
            This Corporation was established as a statutory body in New Delhi on 2nd March, 1957. Under the new Act, the Central Warehousing Corporation was formally re-established on March 18, 1963. This Corporation which made a modest start with seven warehouses, with 7,000 tonnes capacity, in December 1957, had set up 458 warehouses in different places in the country, with a total storage capacity of 78.87 lakh tones at the end of March 2001. Of this, the present utilization is nearly 85 per cent of the total available capacity. CWC is operating 487 Warehouses across the country with a storage capacity of 10.6 million tonnes providing warehousing services for a wide range of products ranging from agricultural produce to sophisticated industrial products. Warehousing activities of CWC include food grain warehouses, industrial warehousing, custom bonded warehouses, container freight stations, inland clearance depots and air cargo complexes. Apart from storage and handling, CWC also offers services in the area of clearing & forwarding, handling & transportation, procurement & distribution, dis infestation services, fumigation services and other ancillary activities.
           The Central Warehousing Corporation provides safe and reliable storage facilities for about 120 agricultural and industrial commodities. The areas of operations of these central warehouses include centres of all-India and inter-state importance.
The functions of the Central Warehousing Corporation are:
(i) To acquire and build godowns and warehouses at suitable places in India;
(ii) To run warehouses for the storage of agricultural produce, seeds, fertilizers and notified commodities for individuals, co-operatives and other institutions;
(iii) To act as an agent of the government for the purchase, sale, storage and distribution of the above commodities;
(iv) To arrange facilities for the transport of above commodities;
(v) To subscribe to the share capital of State Warehousing Corporations; and
(vi) To carry out such other functions as may be prescribed under the Act.
While foodgrains, sugar and fertilizers occupy 78 per cent of the total utilized storage capacity, in the remaining 22 per cent are stored cement, chemicals and other commodities. Warehouses of the corporation are fairly full all through the year.
            Besides the conventional storage godowns, the Central Warehousing Corporation is running air-conditioned godowns at Kolkatta, Mumbai and Delhi, and provides cold storage facilities at Hyderabad. Special storage facilities have been provided by the Central Warehousing Corporation for the preservation of hygroscopic and fragile commodities. The Corporation has been able to evolve a technique for a proper and scientific preservation of jaggery during the hot and rainy seasons by selective aeration and controlled conditions. It has set up special warehouses at some centres for the storage of jaggery. The jaggery stored in warehouses fetches a premium price in the market. The Corporation has also evolved techniques for the storage of spices, coffee, seeds and other commodities.
            The Corporation is operating a number of customs bonded warehouses at important centres in Delhi, Amritsar, Ludhiana, Kolkata, Kandla, Ahmedabad, Baroda, Surat, Bhopal, Cochin, Ernakulam and Mumbai to enable exporters/importers to keep their commodities in a good condition, pending their shipment. It has also undertaken the storage and handling of export and import cargo at the international air-port at Palam, New Delhi. At this complex, all the facilities, including inspection and clearance by customs, the payment of duty into the bank, and space for clearing agents, have been provided by the corporation. It has put up a similar air cargo complex at Amritsar for the export/import of goods. It has been expanding its capacity at the port towns to serve the industry and co-operative bodies. It has already established a sizeable capacity at Mumbai, Kolkata, Cochin, Chennai, Mangalore, Paradeep, Kandla, Haldia and Vizag.
            The Corporation has introduced a scheme, called the Farmers Extension Service at selected centres to educate farmers about the benefits of a scientific storage and use of public warehouses. The Central Warehousing Corporation also provides a package of services, such as handling and transport, safety and security of goods; insurance, standardization, documentation, and other connected services and facilities.
Administrative Setup
            The Corporate Office is located at "WAREHOUSING BHAWAN" 4/1 Siri Institutional Area, August Kranti Marg, New Delhi - 110016. CWC has 17 Regional Offices located in major state capitals of the country. The details of the Senior Executives is as under:

1. B.K. Saha, IAS (Retd.)
Chairman, Central Warehousing Corporation,
Tele: 91-11-26515980 Fax : 91-11-26962411
E-mail: [email protected] ,
2. B.B. Pattanaik,
Managing Director, Central Warehousing Corporation,
Tele: 91-11-26515160 Fax : 91-11-26967844
E-mail: [email protected]
3. G N Nair,
Director ( Finance), Central Warehousing Corporation,
Tele: 91-11-26966295, 26566107 / 103    Fax : 91-11-26534146
E-mail: [email protected]
4. G.Mathialagan, Director ( Personnel), Central Warehousing Corporation,
Tele: 91-11-26852825, 26566107 / 104   Fax : 91-11-26850575
E-mail: [email protected]
5. T.K. Doshi, Director (MCP), Central Warehousing Corporation,
Tele: 91-11-26967245     Telefax: 91-11-26518031
E-mail: [email protected]
6. Vineet Pandey, Chief Vigilance Officer, Central Warehousing Corporation,
Tele: 91-11-26966219 Fax : 91-11-26964082 E-mail : [email protected]
7. Dr. S C Batra, OSD (Recovery), Central Warehousing Corporation,
Tele: 91-11-26851410   Fax : 91-11-26852248   E-mail :
8. O P Bharati, General Manager (Com), Central Warehousing Corporation,
Tele: 91-11-26967712 / 26850568, Fax : 91-11-26967712
E-mail: [email protected], [email protected]
9. A V Jawakar, Secretary, Central Warehousing Corporation,
Tele: 91-11-26518013, 26566107 / 104    Fax : 91-11-26966268
Email: [email protected]
10. N K Grover,  General Manager (F&A)
Central Warehousing Corporation, 
Tele: 91-11-26515148,   Fax : 91-11-26964082   E-mail: [email protected],
11. J V Bendre, Dy. General Manager (Per.) , Central Warehousing Corporation,
Tele: 91-11-26515178  Fax : 91-11-26967256

Our Services offered by CWC
           Scientific storage and handling services for more than 400 commodities include Agricultural produce, Industrial raw-materials, finished goods and variety of hygroscopic and perishable items. Scientific Storage Facilities for more than 200 commodities including hygroscopic and perishable items through network of 487 warehouses in India with its 5,765 trained personnel. Import and Export Warehousing facilities at its 36 Container Freight Stations in ports and inland stations. Bonded Warehousing facilities , Disinfestation services Handling, Transportation & Storage of ISO Containers.
CWC’S FORAYS INTO DEVELOPMENT OF RAILSIDE COMPLEXES
           Railways has vast network for not only operating passenger trains but also for freight movement, an imminent need was assessed to augment the utilization level of Railway transportation system so as to reduce the pressure on road traffic by making it cost effective and efficient operation for the trade. As such, concept of Rail Side Warehousing facilities was evolved by the Corporation as value addition to the rail transport system which extends benefits to the users in avoiding multiple handling of their stocks and resultant escapable losses on this account; curtailing handling cost and having a hassle free efficient operation. For transforming the concept into tangible shape, CWC successfully developed a pilot project of Rail Side Warehousing facility at Whitefield, Bangalore in association with South Western Railway in February 2002 and on the strength of fruitful effect of this project on the front of increase in traffic/freight revenue and the kind of satisfaction that trade enjoyed out of it on availing this value added services in the arena of rail transportation, CWC and Ministry of Railway joined their hand in the avenue of developing Rail Side Warehousing facilities at 22 strategic locations of Railway Terminal to provide better services through total logistic solution to Rail users for, not only to attract additional traffic, but also to provide a cost beneficial and efficient transport cum storage service to the trade under single window concept.
           Under the purview of MoU entered between MoR and CWC, the Corporation has commenced the expansion of RWC facilities at Whitefiled, Bangalore to meet even growing demand of users. The Corporation has started construction of RWC facilities at Nishatpura (Bhopal) - West Central Railway; Shakurbasti (Delhi); Alamnagar (Lucknow); Roza (Shahjahanpur) - all under Northern Railway and Sanathnagar (Hyderabad) - South Central Railway after the agreements entered with respective Divisional Railway Managers. A subsidiary in the name of "Central Railside Warehouse Company Ltd." was incorporated on 10.07.2007, under the Companies Act 1956 which commenced its business on 24.07.2007.

Aircargo Complexes
            Ambitious expansion of CWC over the years has also brought CWC in the operation of Aircargo Complexes which is a major step towards providing complete services as a multi-modal transport operator. Presently, CWC is operating 4 Aircargo Complexes at the International Airports of Amritsar, Goa, Singanallur and Virugambakkam besides managing the accompanied/mishandled cargo warehouse at Indira Gandhi International Airport at New Delhi.

Disinfestation and Pest Control Services
           Govt. of India, vide Notification dated 23rd March 1968, entrusted additional responsibility to CWC to undertake Disinfestation/Pest Control Services beyond its warehouses in respect of Agricultural produce or other notified commodities.
Over the years, CWC has developed the expertise in Pest Management in the following areas

• Rodent Control
• House hold Pest Management- Cockroaches, Mosquitoes, House Flies, Bed Bugs, Spiders, Lizards, Carpet Beetles, Fleas, Crickets, Ants, Wasps, Locusts etc.
• Storage Pest Management.
• Anti-termite treatments (Pre & Post Construction)
• Container Fumigation.
• Ship Fumigation(on Board)
• Pre-shipment fumigation of Export Cargo
• Rail Coach disinfestations
• Aircraft disinfestations
• Hospital & Nursing Homes Treatments
• Disinfestations of Hotels & Restaurants
• Disinfestations of Commercial Complexes & Office premises.
• Disinfestations of Oil Refineries
• Disinfestations of Airports & Ports
• Disinfestations of Delhi Metro Rail Premises

            CWC the only organization in the public sector recognized by the Directorate of Plant Protection Quarantine and Storage, Ministry of Agriculture, Govt. of India as well as the Export Inspection Council of India to undertake Pre-shipment fumigation and Ship (on board) fumigation of exportable commodities.   CWC earned a major breakthrough in disinfestation of aircrafts of Air India using timer device.  CWC has thus earned the status of a National Pest Control Agency.
           CWC has taken lead in accreditation of its pest control operators under newly introduced National Standards on Phytosanitary Measures NSPM 11 & 12 to facilitate MBr fumigation treatment of export/import cargo carrying wood packaging material (WPM) in compliance to the FAO/IPPC guidelines issued through International Standard on Phytosanitary Measures ISPM -15. Under this accreditation regime, the Corporation is catering to quarantine treatments at the following major centres:- CFS-JN Port , CFS-Tuticorin (Tamil Nadu), CFS-Chennai, CFS-Adalaj (Ahmedabad), CFS-Kandla Port (Gandhidham), CFS-Vizag, CFS-Whitefield (Bangalore), CFS-Panambur (Mangalore), ICD-Patparganj (Delhi), CW-Nampally (Hyderabad), CW-Kakinada (Hyderabad), CWC-Regional Office Bhopal, CWC-Regional Office Kolkata,CW-Cochin (Hyderabad), CWC-Regional Office- Mumbai.    

           Major clients of CWC for pest control services include:-Many leading grain exporters, shippers for containerized cargo, Indian Railways, Air India, Air Sahara, Air Deccan, Indian Airlines, Jet Airways, Airport Authority of India, Indian Oil Corporation, GAIL (India) Limited, Reserve Bank of India, AIIMS, Central Public Works Department, VSNL, ONGC, AIR etc
.
           Pre-shipment fumigation and ship fumigation facilities are offered at the following ports:- Mundra, Kandla, Jamnagar, Pipavav, Mangalore / Karwar, Tuticorin, Visakhapatnam, Kakinada, Kolkata, Haldia, Navi Mumbai, Port Blair.          
Some of the Grain exporters who have availed CWC’s pest control services during the recent past include:-
           Satnam Overseas, Cargill India Ltd., Adani Exports Ltd., MMTC, PEC, STC,      Vicnivas Agencies, PUNSUP, Seaways, Bishan Swaroop Ram Kishan Agro, Olam International, LMJ International, SS Exports, V. Arjun, Vishal Exports, Ruchi Soya,       VASS Exports, CWC also takes POD guarantee for off-loading pest free cargo at the foreign destinations (country of import) at a nominal cost in addition to the usual fumigation charges.
           CWC is keen to enter into agreements with users for providing Pest Control Services as well as Strategic Alliance with other pest control service providers/firms dealing with pest control related activities for further widening its clientele.
Pest Control Information Please contact:
Mr. Sher Jagjit Singh, Dy. General Manager, (Pest Control Services)
Central Warehousing Corporation, 4/1, Siri Institutional Area,
August Kranti Marg, Hauz Khas, New Delhi-110016.
Telefax: 011-26862977  Mobile: 9891937407    e-mail: [email protected]>
(c) State Warehousing Corporations (SWCs)
            Separate warehousing corporations were also set up in different States of the Indian Union. The first state warehouse was set up in Bihar in 1956. At the end of March 2001, State Warehousing Corporations were operating 1440 warehouses with a total capacity of over 131.38 lakh tones.
           The area of operation of the State Warehousing Corporations are centres of district importance. The total share capital of the State Warehousing Corporations is contributed equally by the concerned State Governments and the  Central Warehousing Corporation. The SWCs are under the dual control of the State Government and the Central Warehousing Corporation.
Working of Warehouses
            Acts: The warehouses (CWC and SWCs) work under the respective Warehousing Acts passed by the Central or State Governments. They are lincensed under the provisions of the Act.
Eligibility: Any person may store notified commodities in a warehouse on agreeing to pay the specified charges. The person is required to bring his produce to the warehouse for storage. The commodity is inspected, and the quality of the product is determined.
Warehouse Receipt (Warrant): This is a receipt/warrant issued by the warehouse manager/owner to the person storing his produce with them. This receipt mentions the name and location of the warehouse, the date of issue, a description of the commodities, including the grade, weight and approximate value of the produce based on the present price.
           The warehouse warrant is a negotiable instrument and can be transferred by a simple endorsement and delivery. A delivery of part of the goods may be taken through this warrant by the depositor. Sometimes, the warrant may be non-negotiable.
Use of Chemicals: The produce accepted at the warehouse is preserved scientifically and protected against rodents, insects and pests and other infestations. Periodical dusting and fumigation are done at the cost of the warehouse in order to preserve the goods.
Financing: The warehouse receipt serves as a collateral security for the purpose of getting credit. Commercial banks advance up to 75 per cent of the value of the produce stored in the warehouse.
Delivery of Produce: The warehouse receipt has to be surrendered to the warehouse owner before the withdrawal of the goods. The holder may take delivery of a part of the total produce stored after paying the storage charges.
           The main provisions of the Act governing the grant of a license to run warehouses were:  (a) Any person, including a company, association or corporate body may apply to the State Government for the grant of a license to carry on the business of warehousing.
(b) The government grants the license after examining the warehouse building and the financial soundness of the party, and after the realization of the prescribed fees.
(c) The license has to be renewed periodically on payment of prescribed fees.
(d) The warehouse owner is authorized to receive only notified commodities for storage in his warehouse and issue receipts in a prescribed form.
(e) It is the responsibility of the warehouse owner to keep the premises clean, keep different lots of goods separately in the warehouse, and carry on such operations as are necessary to protect the goods against losses from damage and pilferage.

 

 

Number and Capacity of Warehouses
           The Government, the Food Corporation of India, Co-operative Marketing Societies and Central and State Warehousing Corporations have taken important measures for the creation of warehousing facilities in the country. As a result, a large number of warehouses/godowns have been built throughout the country in all important rural and urban centres, metropolitan cities, ports and railway stations.
(a) Central and State Warehousing Corporations (CWC and SWC)
            The number and capacity of warehouses of CWC and SWC in the country at different points of time have been given in Table 7.1.
Table 7.1
Number and Capacity of Warehouses in India (including hired)

Year	Number			Capacity in Lakh Tonnes
	CWC	SWC	Total	CWC	SWC	Total
1957-58	7	-	7	0.07	-	0.07
1960-61	40	266	306	0.79	2.78	3.57
1970-71	102	601	703	8.36	18.11	26.47
1980-81	330	1050	1380	37l89	50.00	87.89
1990-91	495	1331	1826	66.48	93.54	160.02
1992-93	465	1350	1815	64.41	90.74	155.15
1993-94	458	1364	1822	63.73	95.58	159.31
1994-95	457	1370	1827	64.31	101.72	166.03
1995-96	458	1371	1829	69.24	114.71	183.95
199-00	451	1440	1891	74.79	123.74	198.53
2000-01	466	1639	2105	83.91	148.99	232.90
2001-02	475	1540	2015	89.17	815.49	274.66

Source: a) Central Warehousing Corporation of India; quoted in Fertilizer Statistics, Various issues, Fertilizer Association of India, New Delhi, December 1994, p.111-64, and Economic Surveys, Various issues, Government of India, New Delhi. b) Government of India, Annual Report, 1995-96, and Foodgrains – Monthly Bulletin, July 1996, Ministry of Food, New Delhi.
           Considerable efforts were made to increase the storage capacity in the country. The number of warehouses, which had increased from only seven during 1957-58, to 306 during 1960-61, and 703 during 1970-71, went up to 1380 during 1980-81 and further to more than 2000 during 2001-02. The total capacity of warehouses which was almost negligible during 1957-58 went up to 275 lakh tones at the end of March 2002. Out of the total storage capacity of 275 lakh tones, nearly 89 lakh tones was with the Central Warehousing Corporation and remaining 186 lakh tones with State Warehousing Corporations.
           The number of commodities stored in the warehouses has steadily increased. These include foodgrains, fibre crops, fertilizer, cement, rubber, cotton yarn, textiles, paper and leather.
Food Corporation of India
            An efficient management of the food economy with a view to ensuring an equitable distribution of food grains at reasonable prices to the vulnerable sections of society is essential in the present socio-economic environment of the country. The government felt the necessity of an organization which can act as its main agency for handling food grains, acquire a commanding position in the food grain trade as a countervailing force to the speculative activities of private traders and, at the same time, work on commercial lines. Towards the end of 1964, Parliament decided to transfer the government's function of trading in food grains to the public sector. Legislation was enacted; and the Food Corporation of India (FCI) was born on January 1, 1965.
OBJECTIVES

• Effective price support operations for safeguarding the interests of the farmers.
• Distribution of food grains throughout the country for public distribution system
• Maintaining satisfactory level  of operational  and buffer stocks of food grains to ensure National Food Security

           In its 45 years of service to the nation, FCI has played a significant role in India 's success in transforming the crisis management oriented food security into a stable security system. FCI's Objectives are:

• To provide farmers remunerative prices
• To make food grains available at reasonable prices, particularly to vulnerable section of the society
• To maintain buffer stocks as measure of Food Security
• To intervene in market for price stabilization

OPERATIONAL NETWORK
           FCI operates through a country-wide network with its Corporate Office in New Delhi, 5 Zonal Offices, 23 Regional Offices practically in all the State capitals,  165 District Offices(as on 01.10.2008) and 1470 depots (as on 01.01.2007). Most of the Revenue Districts in the country are covered by FCI.  It has a manpower of 33,473 officers and staff /employees as on 31.03.2010 and about 53,646 regular food handling workers besides approximately one lakh food handling contract labourers being engaged by the Handling & Transport Contractors, as on 31.03.2010. The general superintendence, direction and management of the affairs and business of the Corporation shall vest in a board of directors which exercise all such powers as may be exercised or done by the Corporation under this Act. The board of directors, in discharging its functions, act on business principles having regard to the interest of the producer and consumer and shall guided by such instructions on questions of policy as may be given to it by the Central Government.
           Today, the FCI is the unrivalled food marketing agency, serving the interests of both the farmers and consumers. Its market operations prevent the speculative trader from acting against the interest of the farmer by assuring him a remunerative price for his produce. It ensures a prompt and uninterrupted supply of food grains to the vulnerable sections of society all over the country. Operationally, the FCI reaches the remotest corners of the country through its vast network of offices and storage centres. Financially, it is one of the largest public sector undertakings, with an annual turnover of over Rs.25400 crores.
Functions
            The main functions of the Food Corporation of India are:
(a) To procure a sizeable portion of the marketable surplus of foodgrains and other agricultural commodities at incentive prices from the farmers on behalf of the Central and State Governments;
(b) To make timely releases of the stocks through the public distribution system (fair price shops and controlled items shops) so that consumer prices may not rise unduly and unnecessarily;
(c) To minimize seasonal price fluctuations and inter-regional price variations in agricultural commodities by establishing a purchasing and distribution network; and
(d) To build up a sizeable buffer stock of foodgrains to meet the situations that may arise as a result of shortfalls in internal procurement and imports.
Growth and Structure
            The Corporation discharges its responsibility to the nation through a country wide network of offices and points of contact, it is divided into five zones, each region generally coinciding with the geographical boundary of a State. Each region has district offices. The Corporation now has five zonal offices, 19 regional offices, four sub-regional offices, four offices of Joint Managers (operations), 173 district offices, and thousands of operating points throughout the country for its purchase and distribution operations.
Organisational Structure of FCI

          The tremendous growth of the organization is the direct result of the staggering increase in the volume of its business. The progress of the FCI in various areas may be assessed from the following:
(i) Procurement
            The Food Corporation of India undertakes the procurement of food grains on behalf of the Government of India and State Governments in the States where it has been entrusted with this responsibility either as a sole agency or jointly with other public procurement agencies. It also undertakes massive price support operations for cereals on behalf of the Central and State Governments to protect the interests of the growers. It prevents distress sales by ensuring to the farmers, predetermined procurement/support prices. It also handles huge stocks of food grains procured by other agencies for the central pool, and utilizes the services of co-operative societies to the maximum extent possible.
         The Food Corporation of India purchases food grains from producers during both the seasons, directly or through the agency of co-operatives or purchasing agents, and from millers under various arrangements of procurement determined by different State Governments. The quantities procured in different years by the Food Corporation of India are given in Table 7.2. A glance at the procurement of food grains by the Corporation would show the vital and effective role it has played in the national economy. Commercial purchases of some commodities, viz., cereals and pulses, are also made by the Corporation at market prices with a view to supplying them to the defense services.
Table 7.2
Procurement of Food grains by Food Corporation of India
(thousand tones)

Calendar year	Rice	Wheat	Coarse grains	Total
1965	2951	375	705	4031
1970	3043	3183	488	6714
1975	5042	4098	423	9563
1980	5210	5866	102	11178
1985	9568	10355	184	20107
1990	12792	11094	105	23991
1995	9997	12327	-	22324
1995-96*	10047	12327	-	22374
1996-97*	12960	8157	-	21117
1997-98*	15486	9298	-	24784
1998-99*	12590	12652	-	25242
1999-00*	18207	14143	-	32350
2000-01*	20824	16356	-	37180
2001-02*	22129	20630	-	41910
2005-06	14785	27656	1154	43595
2006-07	9226	25107	0.20	34333
2007-08	11127	28491	203	39821
2008-09	22682	33683	1375	57740
2009-10	25382	23687**	320**	49389**

*Figures are for marketing year (October-September for rice and April-March for wheat)
Source : (i) Govt. of India, Department of Food, New Delhi.
(ii) Govt. of India, Agricultural Statistics, At a Glance, 2002 and 2003, New
Delhi.
(iii)   **      As on 8.3 2010
(ii) Storage
            The provision of adequate and proper scientific storage facilities for food grains from the time of procurement till their distribution is another important function performed by the Corporation. Its responsibility for storage has increased with the transfer to it of the responsibility for building up a buffer stock by the government. Food grains are stored in go downs which are scientifically constructed for protection against dampness, rats and fungus.
Till the beginning of 1968, there had been a more or less complete ban on the construction of new go downs. With the onset of the green revolution, there was an urgent necessity of augmenting substantially the storage facilities for food grains at the production and consumption centres. The Corporation, therefore, launched a crash programme for the construction of go downs. It also encouraged private parties to construct modern food grain go downs on a guaranteed occupation basis. Constant and effective inspection and treatment of food grains in storage ensures that the stocks are kept in good condition. New and cheap methods for the preservation of stocks have been developed by the technical experts of the Corporation. Storage losses in FCI go downs have been brought down to less than one per cent as against its former very high percentage loss (up to 10%). The activities undertaken by the FCI for this purpose are:
(a) It has constructed 28.30 million tones of storage capacity – well-built go downs, silos and CAP (Cover and Plinth) located at strategic points near the production and consumption centres and major ports. CAP storages are in large open areas and are scientifically planned to hold thousands of bags of grains under polythene covers.
(b) The FCI has taken over the construction of silos in order to switch over to the bulk handling and storage of food grains in a phased manner. Silos are tall and massive structures with huge storage facilities and facilities for mechanical handling. As a result, the losses arising out of handling are reduced. As a result, the losses arising out of handling are reduced. Handling charges, too, are brought down. The construction of silos has been taken up in Punjab, Haryana, Uttar Pradesh and Delhi.
(c) The FCI uses air strips, army barracks and former palaces for the storage of food grains during the massive procurement season.
(d) The FCI has a chain of 138 quality control laboratories which develop quality control measures to ensure the safe storage of food grains. In addition, scientists, technicians and workers air, rotate and fumigate stocks at regular intervals so that quality does not deteriorate.

Storage Capacity with FCI
( in Million Tonnes as on 1st April)

Capacity.         2003    2004        2005         2006              2007               2008    2009

Covered

Owned             12.82  12.82       12.91             12.93       12.94         12.95        12.97

Hired              13.77    10.85       10.46              9.90          9.34           8.71        12.01

Total               26.59    23.67        23.37          22.83        22.28         21.66       24.98

CAP ( Cover and Plinth)

Owned           2.26      2.21          2.25            2.21             2.29            2.20        2.31

Hired                2.88      1.36           0.41         0.51              0.63         0.03         0.42

Total                  5.14    3.57           2.66           2.72               2.92           2.23       2.73

Grand Total     31.73   27.24        26.03       25.55           25.20        23.89       27.71

(iii) Transportation
The Food Corporation of India organizes swift and massive movement of food grains, both by rail and road, to ensure timely arrivals in the areas of consumption and of storage. This activity of the Corporation enables it to maintain a steady public distribution system – from the procurement centres and the ports to the areas of consumption and storage without any serious difficulty. It is one of the largest users of the railways. The quantity transported by rail and road during 1966-67 was 1.238 million tones, which increased to an average of more than 20 million tones during the last five years.
(iv) Imports
            The Food Corporation of India handles the entire quantity of imported foodgrains at all major ports. This responsibility was entrusted to it by the government in 1969-70. The imported food grains are speedily dispatched to various destinations to avoid congestion at the ports and to augment supplies to the public distribution system.
(v) Distribution
            Another important function of the Corporation is the distribution of procured/ imported food grains through nearly 4.91 lakh fair price shops all over India. Food grains are issued on the basis of the allocations made by the Central Government. The Food Corporation of India makes food grains available to the vast majority of population at reasonable prices. The quantity of food grains distributed through public distribution and open sales has varied between 17.4 to 25.8 million tones during the last 5 years.

(vi) Processing
          The Food Corporation of India has made notable strides in the field of food processing. It has acted as a pace-setter in the modernization of food processing operations. It has set up 24 modern rice mills in different States to increase the availability of rice and extract oil from rice bran. It has also set up a Paddy Processing Research Centre at Tiruvarur in Tamil Nadu in collaboration with the Government of Tamil Nadu and the Union Ministry of Agriculture with a view to evolving a new technology for increasing the outturn of rice at rice mills, better utilization of bran for the extraction of edible oil and proper use of by products. A solvent extraction plant at Sembanarkoil (Tamil Nadu) has also been set up for the manufacture of edible and industrial grade oil from rice bran. These have served as models for private interests in this line to set up such mills elsewhere.
          The Corporation has set up paddy dryers in Thanjavur district in Tamil Nadu and a maize dryer at Khanna in Punjab to dry the grain and transport it to other districts without any damage by quick sprouting diseases which break out because of high moisture content. The FCI has also set up a solvent extraction plant at Ujjain (M.P.) to process groundnut. The FCI has set up a maize mill at Faridabad (Haryana) to manufacture a variety of maize products. It has set up a dal mill at Lucknow (U.P.) to meet the purchase requirements of the army.
          The FCI also produces (about 40,000 tonnes per annum) a protein-rich food (Balahar), a midday meal for school children, Balahar is a mix of wheat flour, groundnut meal, vitamins and minerals.
(vii) Consultancy
            The Food Corporation of India has taken a new function of consultancy service, and provides technical and scientific assistance to other public and private undertakings as well as co-operatives in the country and abroad. The consultancy service offers assistance in the modernization of rice and dal mills and other agro-processing units. The service includes the conduct of feasibility and technoeconomic studies, management systems and optimization studies, and market surveys.
(viii) The corporation also collects and manages levy sugar on behalf of the government of India.

Buffer Stocking, Procurement and Distribution of Food grains
Buffer Stocks
            The term buffer stock of food grains refer to the stock of food grains maintained by the government to be used as a buffer to cushion the shocks of fluctuating supply and price, to meet the emergency needs and to meet the situations arising out of serious unexpected shortages resulting from transport bottlenecks, natural calamities like war, flood, famine, earthquakes, and from the influx of refugees.
The main advantages of maintaining a buffer stock are:
(i) It helps in the stabilization of prices by counteracting the effects of the activities of speculators and hoarders;
(ii) It safeguards the producers against low prices, specially during the surplus-production years; and
(iii) It imparts stability to the country's food economy.
          The government enters the market and purchases food grains for the maintenance of the buffer stock. This buffer stock can be built either by internal purchases or by imports from foreign countries. It is maintained by the Food Corporation of India and has averaged more than 10 million tones annually since 1976, as against a normal stock of less than 5 per cent tones before that year. After 5 years of a very comfortable position in food grains, the year 1981 witnessed some tightening in the supply position. The all-time record off take of 14.9 million tones in 1980, the relatively low procurement of 11.2 million tones, and the estimated exports of 2 million tones of food grains in repayment of a wheat loan led to a sharp decline in the size of stocks. The procurement of wheat boosted the food grains stocks to 13.5 million tones by the end of July 1981. These stocks, though adequate, were well below the level during the five years from 1976 to 1980.
          In mid-eighties, a buffer stock of 10 million tones comprising 5 million tones of wheat and equal quantity of rice was considered adequate. It should be noted that this buffer stock is over and above the operational stocks. Considering both together, a stock of around 20 million tones was considered necessary for a country of India's size. However, the stock, which can be considered optimum, depends on the level of public distribution of food grains intended by the government. On July 1, 1990, the food rains stock with the government of India was 20.3 million tones. But on the same day, a year before (July 1, 1980), the stock was only around 13 million tones.

          Apart from CWC and SWCs, the Food Corporation of India has also created storage facilities. The Food Corporation of India has a storage capacity of 21 million tones. Most of the capacity is of covered type which include conventional but scientifically designed godowns and silo complexes but a part of the storage capacity is of covered and plinth (CAP) type. The CAP storage capacity consists of cemented floor as the base and tarpaulins or other similar sheets as the cover (Table 7.3).

Table 7.3 Storage Capacity of Food Corporation of India
                                                                                                                                                                                    (Lakh Tonnes)

At the end of		Covered	Cover and Plinth (CAP)	Total
1990-91	Owned	119.97	10.42	130.39
	Hired	75.95	14.74	90.69
	Total	195.92	25.16	221.08
1995-96	Owned	168.24	57.66	225.90
	Hired	40.29	-	40.29
	Total	208.53	57.66	266.19
2001-02	Owned	126.10	83.38	209.48
	Hired	141.07	-	141.07
	Total	267.17	83.38	350.55

Source: Food Corporation of India, New Delhi and Ministry of Food, Government of India, New Delhi.

PROCUREMENT OF RICE FOR CENTRAL POOL (Marketing Season: October-September)
PROCUREMENT OF RICE FOR CENTRAL POOL
                                                                                                              (Figures in lakh tonnes)

Procurement

Year                                  FCI                            State Agencies                     Total

2005-06                           109.77                               166.80                             276.56

2006-07                           168.85                                 81.90                             250.75

2007-08                           124.28                               160.65                             284.93

2008-09                             27.63                               309.22                             336.85

2009-10*                           10.55                               143.07                             153.62

*Position as on 31.12.2009

PROCUREMENT OF RICE (INCLUDING PADDY IN TERMS OF RICE)
Total Procurement during KMS 2009-10 = 153.62
Total Procurement during KMS 2008-09 = 152.00

2009-10                                              2008-09

State                       Quantity             % of Quantity Procured         Quantity           % of Quantity Procured

Andhra Pradesh      9.01                             5.87                               14.80                           9.74

Chhattisgarh         11.28                             7.34                               10.21                           6.72

Haryana                   18.03                           11.74                              13.75                           9.05

Madhya Pradesh     0.40                             90.26                            90.61                           90.40

Source: Annual Report-2009-10, Department of Food & Public Distribution

Procurement of Rice (Including Paddy in terms of rice) During KMS 2008-09
for the Central Pool Total procurement = 336.85 lakh tonnes

State                               Quantity Procured         % of Quantity Procured

(in lakh tonnes)              to Total Procurement

Andhra Pradesh                          90.61                       26.90

Chhatisgarh                                28.48                         8.45

Haryana                                      14.25                         4.23

Madhya Pradesh                          2.45                          0.73

Maharashtra                                 2.61                         0.77

Orissa                                         27.90                         8.28

Punjab                                        85.53                       25.39

Tamilnadu                                  11.99                         3.56

Uttar Pradesh                             36.87                       10.95

Uttarakhand                                 3.49                         1.04

Total                                        304.18                       90.30

Others                                        32.67                         9.70

Grand Total                             336.85                     100.00

The share of procurement of paddy by State Agencies out of the total procurement during KMS 2009-10(31.12.09) and 2008-09 in major States has been as under: -

State                            Quantity Procured                    % of Quantity Procured by                                        (In Lakh Tonnes)                         State Agencies to Tota

Agencies                   FCI         State Agency   Total            % of state agency to others in the state

Andhra Pradesh     0.18            0.19                 0.37                  51.35

Chhatisgarh                                3.48                   3.48                100.00

Madhya Pradesh                       0.12                   0.12                100.00

Maharashtra                              0.29                   0.29                100.00

Orissa                      0.06              0                       0.06                 0.00

Punjab                      6.69           131.15            137.84                95.15

Tamilnadu                                   0.33                   0.33                100.00

Uttar Pradesh                            1.44                   1.44                100.00

Uttarakhand          NEG              0.05                   0.05                100.00

Total                      7.35              162.82               170.22                 95.65

Others                    0.21                1.09                   1.30                 83.85

Grand Total           7.56                 163.96               171.52                 95.59

The State-wise procurement of wheat and the share of different States during the last 5
years is given below:-
Total Paddy procured during KMS 2009-10 (As on 31.12.2009)

State                    Quantity Procured                               % of Quantity Procured by

(In Lakh Tonnes)                                  State Agencies to Total

FCI             State            Total

Andhra Pradesh     0.18              0.19             0.37                            51.35

Chhatisgarh                                3.48             3.48                              100.00

Haryana                  0.42           25.82           26.24                             98.40

Madhya Pradesh                         0.12             0.12                             100.00

Maharashtra                                0.29             0.29                             100.00

Orissa                     0.06                                  0.06                                0.00

Punjab                    6.69          131.15         137.84                              95.15

Tamilnadu                                   0.33             0.33                            100.00

Uttar Pradesh                              1.44              1.44                            100.00

Uttarakhand          NEG              0.05              0.05                            100.00

Total                      7.35           162.82          170.22                              95.65

Others                     0.21             1.09               1.30                              83.85

Grand Total             7.56          163.96         171.52                              95.59