By Amit Kapoor, Pradeep Puri and Ananya Khurana
Re-architecting FCI to Raise Farm Incomes
India created the Food Corporation of India (FCI) in 1965 as a bulwark against hunger, responsible for procuring grain at assured prices, stabilising markets, and feeding millions through the Public Distribution System (PDS). Six decades on, the mission remains vital, but the context has shifted dramatically. Today, India stands at a point of opportunity: managing abundant cereal stocks, building resilience against climate variability, and optimising fiscal resources. The challenge is no longer scarcity but unlocking efficiency and innovation, so that a system built for shortages becomes one that delivers prosperity while paving the way for a more agile, sustainable, and future-ready food system. A recent pact between the Department of Food and Public Distribution and the FCI, introducing performance benchmarks and accountability measures for FCI Depots, signals that decisive shift, and it is a welcome start.
The way forward requires a structural rethink. The first step is strategic clarity. FCI should pivot from open-ended physical MSP procurement to a more calibrated role focused primarily on maintaining buffer stocks for food security, while reducing unnecessary costs. This basically implies delinking procurement volumes from storage capacity so that procurement responds to buffer stock norms and does not exceed them by default. In this re-architecture, FCI’s mandate should be explicitly confined to buffer stocking and scientific storage of foodgrains.
Modern silo capacity and smarter buffer stock management, aligned with domestic price stabilisation objectives, can transform price stabilisation from a reactive exercise into a predictable, rules-based system. Add to this a coherent welfare architecture, as the FCI cannot be revamped standalone or in one stroke. It must evolve alongside reforms in MSP and fertiliser subsidies through Direct Benefit Transfers (DBT), guided by broad stakeholder consultation and consensus. This could address chronic storage inefficiencies, reduce fiscal burdens, and eventually support India’s ambition to reach $100 billion in agricultural exports by 2030.
To chart the way forward, we must first understand the current mosaic. Buffer stocks act as economic insurance as they are procured in surplus to prevent price crashes and released during shortages to curb inflation. Norms are set quarterly to meet the National Food Security Act (NFSA) requirements, strategic reserves, and contingencies, yet stocks often exceed these levels. As of July 1, 2025, rice and wheat reserves stood at 736.61 LMT against norms of 411.20 LMT, forcing Open Market Sale Scheme (OMSS) releases to moderate prices. Such overhangs inflate carrying costs, risk quality loss, and add logistics expenses, implying the need for smarter storage and faster rotation. India already possesses sufficient public storage capacity to hold buffer stock norms. It is excess procurement, not capacity constraints, that generates today’s inefficiencies.
The financial implications are stark. In 2023–24, FCI spent a staggering ₹1,87,834 crore on procurement, logistics, employee remuneration, and depreciation on its traditional storage capacity, translating to ₹22,347.62 per tonne. Of the total expenditure, the Comptroller and Auditor General flagged ₹62.76 crore spent on storage and supervision of food stock as avoidable costs in Punjab and Haryana alone. Set this beside a modern domestic silo operator that manages similar functions at around ₹534 per tonne, illustrating how technology and incentives dramatically lower costs. While conventional FCI godowns cost about ₹915 crore per million tonnes to build, modern silos cost only marginally more at about ₹1,000 crore, whereas global benchmarks hover around ₹207–₹373 crore. Even with higher upfront costs, silos slash losses, improve quality, and deliver long-term savings. Aligning with global benchmarks would be nothing short of an economic and operational revolution. Silo-building, therefore, should be a national priority.
India’s rapid rollout of Public‑Private Partnership (PPP) silos is a step in that direction. The six modern facilities (50,000 MT each) commissioned in Bihar, Punjab, and Gujarat promise scientific storage, bulk handling, and rail integration. Silo capacity is projected to rise from 2.8 MT to 9 MT across 250 locations in three years, with long leases and per-tonne storage charges creating clear performance incentives. The payoff is real: scientific storage of wheat can reduce losses to 0.3–2%, preserving quality and lowering re-bagging, fumigation, and shrinkage. These efficiency gains matter because they ensure that even if MSP procurement is scaled back, food security remains intact as long as buffer‑stock norms under the National Food Security Act (NFSA) are maintained. PPP silos should therefore be scaled pan-India, functioning as dynamic price‑stabilisation nodes rather than passive warehouses.
All this hinges on policy discipline. Rule‑based OMSS bands should automatically trigger releases whenever stocks exceed buffer norms, with reserve prices calibrated to regional wholesale indices and transport costs. A re-architected buffer‑stock policy can raise farm incomes through three reinforcing channels. Faster OMSS releases could generate fiscal savings that can be redirected toward DBT, agronomic extension, and support for lagging regions. Eliminating the wastage of nearly 28 per cent of subsidised foodgrains could unlock savings of about ₹70,125 crore, allowing reinvestment in scientific storage that preserves grain quality, cuts losses, and improves realised farm returns. At the same time, predictable price stabilisation would reduce crash risk and encourage diversification away from water-intensive cereals toward pulses and oilseeds. Crucially, this does not dismantle food security. A re-purposed FCI would continue limited, calibrated procurement solely to replenish buffer stocks under the NFSA, managed through PPPs or other appropriate models, as farmer support increasingly shifts to direct income transfers.
Clear institutional alignment can strengthen India’s food management system. By firmly anchoring FCI in buffer stocking and storage efficiency, while distinguishing food security from market and trade functions, policy coherence can be maintained. Transparency is key. Monthly dashboards on stocks and releases of food grains can then convert buffer management from a recurring fiscal burden into a strategic lever for stability.
Done right, FCI will evolve from a stock‑holding steward into a market-stabilising institution aligned with food security. Buffer stocks will cease to be warehouses of subsidy and become instruments of prosperity, delivering fiscal prudence, ecological balance, and higher farm incomes. This is not a final blueprint but a reform pathway worth exploring, one that modernises FCI without compromising food security while unlocking value for farmers and the economy alike.
The article was published with Hindu Business Line on February 27, 2026.
