Cost optimization of Food Corporation of India value chain

Abstract

The Food Distribution network in India is handled by the Food Corporation India (FCI). It was founded in 1965 with the following objectives in mind • Price support operation to prevent exploitation of poor farmers in India • Distribution of food grains throughout the country • Maintaining buffer stocks for emergencies • Regulation of food grain price to ensure fair price to all consumers

To execute these operations smoothly, FCI is divided into i. zones ( North, East, West, South, and North-East). Each zone is further divided into multiple regions, with the total of areas being 26.

In collaboration with State Government, in each region, FCl set up purchase centers known as mandis where crops are purchased at Minimum Support Price(MSP). The Central Government decides the MSP with no involvement of the FCI.

Once harvested crops are procured from mandis, they are transported to storage capacities throughout the country. In addition to using storage capacities owned directly by them, FCI also uses storage houses from Central and State Warehousing Corporation(s), State Agencies, and Private Parties.

Since crop production in India is not uniform across states, FCl also undertakes the mammoth job of transporting food to different country areas. On average, FCI transports 42-45 million tonnes of food grains via rail, road, and waterways, with rail accounting for about 80% of the transport. Hence, this transportation job is done using about 98 FCl owned sidings and 550 railheads (owned by Indian Railways and others)

Throughout this whole process, FCI is aided by the following major players • Central Government — For deciding MSP, warehousing, railways • State Government — determining location of mandis. warehousing • Private Players — Warehousing, setting up railway tracks. Since 2005, the contract for both has been awarded to Adani.