FCI Current Affairs - 2019
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With wheat production at record high, government has raised import duty on wheat from existing 30% to 40% to support local farmers interest. The higher duty will help offtake of domestically produced grain by discouraging milers to import wheat but to buy local produce and help protect farm prices. The oversupply in domestic market due to back to back bumper production of food grains has put wheat prices under pressure.
- India’s wheat production for 2018-19 crop year (which runs from July to June) is 2% higher than 2018, at a recored production of 99.12 million tonnes.
- Food Corporation of India (FCI) which holds government’s wheat stocks already had 16.99 million tonnes in April and after next purchase by government its stock could reach 57 million tonnes by May end.
- Reason for bumper production: In a bid to improve farm income government raised minimum support price (MSP) of wheat (rate at which FCI buys from farmers) by 6% (Rs.1,840 per 100 kg for 2019), which acted as a benchmark for open market in wheat.
- For similar bumper crop in 2018, government increased import duty on wheat from 20% to 30% which resulted in sharp drop in wheat import.
- In past India has imported wheat from Australia, Ukraine and Russia, but with global prices in addition to 40% duty would make import virtually impossible.
- Earlier, in concern of its farm duty rates as well as on subsidies it gives to farmers,
- In past Australia has taken India to WTO’s arbitration panel on its farm duty rates and subsidies given to farmers, but it hardly affects because India by right can raise duties on wheat up to 80% under a bound rate agreement it has signed at WTO.
Wheat is India’s staple food, placed second to rice. Uttar Pradesh is the largest wheat producing state in India followed by Punjab, Haryana, Madhya Pradesh. India is second largest producer of wheat in the world. China is world’s largest producer, followed by India, Russia, and the United states.
Food Corporation of India
It is a statutory non-profit organization founded and run by Government of India and also run by state Governments. It was created in 1965 under Food Corporations Act 1964, to implement objectives of National Food Policy. Initially headquartered at Chennai it was later shifted to New Delhi. As it is a state-owned enterprise, it has presence in every state in India.
- Safeguarding farmers interests by providing them remunerative prices.
- Making food grains available at reasonable prices throughout the country (for public distribution system), particularly for vulnerable section of society.
- Intervening in market for price stabilization.
- Maintaining buffer stocks as a measure of Food Security.
The Union Cabinet has excluded States and Union Territories except Arunachal Pradesh, Kerala, Delhi (UT) and Madhya Pradesh from National Small Savings Fund (NSSF) investments with effect from 1 April 2016
The cabinet meeting chaired by Prime Minister Narendra Modi also approved one-time loan of Rs. 45000 crore from NSSF to Food Corporation of India (FCI) to meet its food subsidy requirements.
- Arunachal Pradesh will be given loans to the tune of 100% of NSSF collections within its territory, while Kerala, Madhya Pradesh and Delhi (UT) will be provided with 50% of collections.
- Through the budget line of Department of Food and Public Distribution, the servicing of interest and principal of debt will be extended to Food Corporation of India (FCI).
- The repayment obligation of the FCI in respect of NSSF Loans will be treated as the first charge on the food subsidy released to the FCI.
- In addition, FCI will be required to reduce the amount of its current Cash Credit Limit with the banking consortium to the extent of the NSSF loan amount.
- An legally binding agreement will be signed between Department of Food, FCI and NSSF on the modalities for repayment of interest rate and the restructuring of FCI debt will be made possible within 2-5 years.
- In the future, NSSF will invest on items whose expenditure is ultimately borne by Union Government and Union budget will meet requirement of the repayment of the principal and interest of that amount.
The 14th Finance Commission (FFC) had recommended that the State Governments should be excluded from the investment operations of the NSSF. The main reason given was that NSSF loans come at an extra cost to the State Governments compared to the market rates which are considerably lower. Following this, Union Cabinet in February 2015 held that this recommendation will be examined in due course in consultation with various stake holders. Later, all states except Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh expressed their desire to be excluded from NSSF investments.
About National Small Savings Fund (NSSF)
- NSSF was set up on 1 April, 1999 with an objective to account all the monetary transactions under small savings schemes of the Union Government under one umbrella. It was set up in the Public Account of India.
- The net accretions under the small savings schemes are invested in the special securities of various States/ Union Territories (with legislature)/Central Governments.
- States not only can borrow from this account but have the obligation to borrow. The minimum obligation of States to borrow from the NSSF has been brought down from 100% to 80% of net collections from 2007.