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Reforms may decimate FCI, fear employees

T. Ramavarman

THRISSUR: The consultancy which has been appointed to come up with proposals for improving the efficiency of the Food Corporation of India (FCI) is reported to have advised the Corporation to outsource completely procurement and distribution activities to private parties and State agencies.

The US-based multi-national consultancy, McKinsey has reportedly claimed that such an initiative will yield a saving of Rs. 2,500 crores in the long run for the Corporation.

Highly placed sources in the Corporation which has been playing a pivotal role in maintaining the food security of the country, fear that this and other similar suggestions contained in the detailed report submitted by the McKinsey to the FCI top brass and to the Food Ministry will lead to the virtual decimation of the organisation.

They said even though the report was being kept in extreme confidentiality, subtle efforts are being made to implement its suggestions despite the fact that there has been no word yet officially from the Ministry or from the Corporation.

Procurement

Recalling that procurement and distribution are the primary functions of the FCI which was set up in 1965 with the basic objectives of ensuring remunerative prices for the farmers for foodgrains, the sources told The Hindu here that if these two functions were to be outsourced, the relevance of the FCI would be lost.

The consultancy itself in its report is known to have acknowledged the bitter resistance that this recommendation is likely to invite from workers and staff of the FCI, and conceded that it can be implemented only by enlisting the strong support of the Food Ministry.

The McKinsey report has asserted that a series of reforms, both in the short run and long run, in areas like reducing staff strength, cutting down the handling, transport and labour costs will lead to a saving of Rs. 5,000 crores.

Outsourcing

According to the report, Rs. 2,500 crores could be saved by the FCI by streamlining the operations and by appropriate adoption of financing instruments.

The consultancy feels that the FCI can save over Rs. 200 crores by centralising and outsourcing all handling and transportation to large logistics, and another Rs.280 crores by streamlining the rake movements.

Disclosing that the consultancy has recommended renting excess storage capacity to private parties to yield a saving of about Rs.100 crores, the sources said efforts to implement this suggestion had already begun even in Kerala.

The consultancy has recommended that the Corporation can save Rs.200 crores in wage bills by revising the staff norms and launching a Voluntary Retirement Scheme (VRS). And the reforms on the labour front are expected to yield a saving of Rs. 255 crores.

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