Food Corporation of India (FCI)

Background: Why was FCI needed in the first place?

Let’s start with a simple reality check.

In the 1960s, India was staring at food shortages. Our dependence on foreign aid like the infamous PL-480 wheat from the US made food insecurity not just an economic issue—but a national dignity issue.

To tackle this, the Government of India took two key steps in 1965:

• It created the Food Corporation of India (FCI) to manage food grains from procurement to distribution.
• It established the Agricultural Prices Commission (now CACP) to ensure fair prices to farmers.

This created a dual support system:
👉 One for the producer (via MSP and procurement), and
👉 One for the consumer (via Public Distribution System or PDS).

What exactly is FCI?

FCI is a statutory body, i.e., it was created by an Act of Parliament—the Food Corporations Act of 1964.
It works under the Department of Food and Public Distribution, which is part of the Ministry of Consumer Affairs, Food and Public Distribution.

FCI’s Core Responsibilities (Think of it as a 5-Step Supply Chain)

You can remember this as P-S-M-D-S:

Function	What It Means
Procure	Buy food grains (mainly wheat and rice) from farmers at MSP.
Store	Store grains safely across thousands of warehouses.
Move/Transport	Shift grains from surplus to deficit states.
Distribute	Supply food grains for schemes like PDS and Mid-Day Meals.
Sell (if needed)	Offload excess stocks through Open Market Sale Scheme (OMSS) or exports.

Organizational Structure of FCI

Just like a well-organized company, FCI operates through:

• Headquarters – New Delhi
• 5 Zonal Offices
• 25 Regional Offices
• 170+ District Offices

This network allows FCI to function across India—from procurement fields to ration shops.

Objectives of FCI (Why does it exist?)

1. Ensure remunerative prices for farmers via MSP.
2. Maintain buffer stock to ensure national food security.
3. Make food affordable and accessible for the poor under NFSA.
4. Act as a logistics lifeline to run PDS smoothly across the country.
5. Price stabilization—by releasing food in markets when prices rise sharply.

Commission for Agricultural Costs and Prices (CACP)

Established in 1965, CACP (earlier APC) is not a regulator or a statutory body—it is an attached office under the Ministry of Agriculture and Farmers’ Welfare.

It doesn’t set prices but recommends them to the Government. Think of it like a policy advisor for farmers.

What does CACP do?

CACP recommends Minimum Support Prices (MSP) for 23 crops to:

• Incentivize farmers to grow certain crops.
• Ensure fair returns to farmers.
• Encourage adoption of new technology and boost overall productivity.

These recommendations are based on economic, environmental, and policy factors like cost of cultivation, demand-supply trends, inter-crop price parity, etc.

Major Activities of FCI

1. Procurement of Food Grains

• Conducted at MSP, announced before every season.
• Ensures farmers get assured prices.
• Procurement is done either directly by FCI or through State Agencies.
• Under the Decentralized Procurement Scheme (DCP), states like Chhattisgarh, Odisha procure and distribute food themselves—FCI reimburses the cost.

2. Distribution through PDS

• After procurement, FCI distributes grains for schemes like:
  • NFSA
  • TPDS
  • Mid-Day Meals
• Grains are sold to state governments at Central Issue Price (CIP).
• From there, distribution is done via Fair Price Shops (FPS) to beneficiaries.

3. Storage and Movement

• Grains are stored in:
  • Government godowns
  • Silos
  • CAP (covered and plinth) storages
• FCI moves food from surplus zones (Punjab, Haryana) to deficit zones (NE, Eastern states).

Reforms: Restructuring of FCI (Based on Shanta Kumar Committee, 2015)

Why the Reform Was Needed?

• Rising food subsidy bill
• Inefficient procurement & storage
• Leakages in distribution
• Surplus stock causing wastage

Key Recommendations of the Committee

Area	Recommendation
Procurement	States with capacity (like Punjab) should procure on their own. FCI should focus on eastern India where farmers face distress sales.
Warehouse Receipt System	Farmers can deposit grain, take loan (80% of MSP), and sell later when prices rise. Reduces govt storage burden.
MSP Reforms	Expand real support to pulses and oilseeds—not just wheat and rice.
Stocking & Storage	Phase out CAP, promote silo tech, use PPP for cost-effective storage.
Movement of Grains	Use containers to cut losses and increase efficiency.
Buffer Stock Liquidation	Create a transparent, automatic system to sell excess stock through OMSS or exports.
End-to-End Digitization	Full digital tracking—from procurement to delivery.
Revisit NFSA Coverage	Current 67% population coverage under NFSA may be too high—needs re-evaluation.

Conclusion: FCI in the 21st Century

To conclude, FCI is more than just a grain-handling agency. It is a critical pillar of India’s food security architecture—balancing farmer welfare with consumer needs.

But for FCI to remain effective, it must evolve with changing needs—improving efficiency, using technology, and aligning with market realities.

The ultimate goal?
A system where no farmer is forced to sell at a loss, and no citizen is forced to sleep hungry.

Open Market Sale Scheme (OMSS)

Let’s begin with a practical situation.

Imagine it’s summer—lean season for agriculture. Food grain production is low, but demand continues. In such times, if supply isn’t managed, prices of essential food grains like wheat and rice can shoot up, hurting consumers, especially in deficit regions like parts of North-East or urban areas.

To prevent this, the Government launches the Open Market Sale Scheme (OMSS).

👉 OMSS is a price stabilization tool. It allows the government to sell food grains from its buffer stock into the open market to:

• Increase supply,
• Control rising prices,
• And help bulk consumers, traders, and even State governments when needed.

So, OMSS is not about PDS or ration cards—this is about market intervention, like a referee ensuring fair play in the food market.

Who Conducts OMSS?

The Food Corporation of India (FCI) is the nodal agency that:

• Maintains buffer stocks of grains,
• Supplies them for welfare schemes,
• And sells excess stock under OMSS when instructed by the Central Government.

How is OMSS Implemented?

Earlier, OMSS sales used to happen through tenders or offline means. But now, in the age of transparency and efficiency, FCI has shifted to e-auctions.

👉 The platform used is:
NCDEX – National Commodity and Derivatives Exchange Limited

• Weekly e-auctions are conducted,
• Both private traders and bulk consumers (like flour mills, food processing companies) can participate,
• Even State/UT Governments can buy from this scheme if they need food grains outside of TPDS.

Components of OMSS (Domestic)

Currently, OMSS is implemented through three key channels, all via e-auctions:

Scheme Type	What It Means
1. Wheat via e-auction	Sold to bulk buyers directly through e-auction.
2. Wheat via dedicated movement	Grain is moved from specific godowns to buyers—more organized logistics.
3. Raw Rice (Grade A)	Premium grade rice also sold to bulk consumers via e-auction.

So OMSS is not a retail affair—it’s aimed at large-volume buyers who influence market supply chains.

Why OMSS Matters

For Government	For Consumers	For the Market
Helps manage buffer stocks efficiently	Controls sudden price rise	Increases transparency and predictability
Reduces costs of holding excess grains	Ensures availability during lean seasons	Builds trust in government’s role as market stabilizer

Think of it like the RBI managing liquidity in the financial market. Similarly, FCI through OMSS manages “grain liquidity” in the food market.

NCDEX: The Digital Marketplace for Grains

National Commodity and Derivatives Exchange (NCDEX) is an online commodity exchange set up in 2003, headquartered in Mumbai.

Think of it as the “stock market” for agricultural commodities.

While the stock exchange trades in company shares, NCDEX deals in agricultural products like:

• Wheat
• Barley
• Soybean
• Chana
• Mustard seed, etc.

It provides a platform for transparent trading, with real-time prices, ensuring fair play between buyers and sellers.

Role of NCDEX in OMSS

NCDEX acts as the online auction house for FCI. Here:

• E-auctions are scheduled weekly,
• Buyers register and place their bids online,
• Allocation is done transparently based on price and quantity.

Thus, NCDEX ensures: ✅ Transparency
✅ Efficiency
✅ Real-time market linkage

In Summary

Open Market Sale Scheme (OMSS)	NCDEX
A scheme for offloading government foodgrain stock into open markets	A digital exchange for agricultural commodity trading
Helps moderate prices, especially during shortages	Ensures transparent and efficient e-auctions
Operated by FCI under government directions	Platform used for selling grains under OMSS
Involves bulk buyers, not retail customers	Provides real-time access to bids and prices

Conclusion

OMSS is one of the smartest tools in India’s food management toolkit.
While FCI is like the warehouse and logistics giant,
OMSS is the market intervention specialist,
and NCDEX is the digital auction floor where all of it plays out.

This trinity ensures that even when production fluctuates, markets stay calm, food prices stay affordable, and public resources are used responsibly.