August 20, 2014 / 1:12 PM / 5 years ago

Govt begins revamp of Food Corporation of India to cut waste, tame prices

A labourer spreads maize crop kept for drying at a grain market in Amritsar, July 10, 2014. REUTERS/Munish Sharma/Files

NEW DELHI (Reuters) - India has set up a panel to suggest an overhaul of a state-run food grain procurement agency as part of its plan to reduce wastage and help control runaway food prices.

Prime Minister Narendra Modi, who took charge in May after a landslide victory, promised during the election campaign to break up the Food Corporation of India (FCI) into three divisions for handling procurement, management and distribution.

The revamp comes as Asia’s third largest economy is struggling for years now to tame near double-digit food inflation - the highest among the emerging economies.

The consumer-price-index based food inflation rose to 9.16 percent in July compared with 7.90 percent the previous month, amid growing concerns of a partial drought in some regions.

“It is commonly perceived that FCI is plagued today with several functional and cost inefficiencies, which need to be removed for efficient management of food grains and saving costs,” a government statement said on Wednesday.

The panel, headed by former Food Minister Shanta Kumar, will submit its report in three months.

The organisation, which is central to running the world’s largest public food distribution programme, has long been criticised for poor management of country’s growing food stockpile.

FCI buys about one-third of total wheat output to run welfare programmes and keep stocks for emergency needs. It has stored 57.38 million tonnes of food grain as on Aug 1, much higher than the required stocks of 16.2 million tonnes and strategic reserves of 5 million tonnes.

The government plans to spend nearly 1.15 trillion rupees on food subsidies in the current fiscal year 2014/15 ending March to provide subsidised food grains to about two-thirds of its 1.27 billion population.

Editing by Alison Williams

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