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In a move probably aimed at reducing handling costs at the initial stage of the rice procurement process, the Centre has asked Punjab to explore the possibility of auctioning paddy in some districts where there is a surplus.

·         Food Corporation of India (FCI) could be a Public Sector undertaking, underneath the Department of Food & Public Distribution, Ministry of client Affairs, Food and Public Distribution.

·         FCI could be a statutory body started in 1965 under the Food companies Act 1964.

·         It was established against the backdrop of major shortage of grains, especially wheat.

·         It has primary duty to undertake purchase, store, and move/transport, distribute and sell food grains and different foodstuffs.

·         Economic Cost to FCI Economic Cost is the total cost to FCI.

·         It consists of Acquisition price and distribution cost. Acquisition price consists of Minimum Support price (MSP) and procurance incidental price.

·         Procurement incidentals are expenses incurred during procurement till the food grains reach the first point of godown.

·         The elements are state taxes, commission to arathias or societies, bagging materials, mandilabour, transportation from mandi to depot etc.

·         Methodology followed for Calculation of Economic price area unit based on the GoI circular to apportion the operational price of FCI into Buffer carrying charge and distribution cost.

·         Distribution cost becomes the part of the Economic cost whereas the Buffer carrying cost becomes the part of Buffer subsidy.

·         Operational Cost to FCI Operational Cost of FCI is categorized under the following elements:-

1.      Transportation Cost/Freight

2.      Handling Charges

3.      Storage Losses

4.      Interest cost

5.      Operational Losses

6.      Administration Charges

·         Food Subsidy – Food subsidy has three elements. Consumer subsidy.

·         The difference between Economic cost and Central Issue Price (CIP) under different schemes of GoI multiplied by quantity of food grains issued under different schemes.


·         Second part is Buffer carrying charge. a part of the operation price apportioned to buffer stock supported excess stock control over and on top of operation stock (four months sale).

·         Third part includes subsidy on coarse grains, regularization of operation losses of Food Corporation of Republic of India and alternative non-plan allocation to State Govts.