1.
Case Context
Food
Corporation of India (FCI) was incorporated with the function of undertaking
purchase, storage, movement, transportation, distribution and sale of food
grains on behalf of the Government of India (GOI).A
national food security system of the GOI is operated under an operational framework
involving procurement of food grains through price support operations by fixing
Minimum Support Price (MSP), maintenance of buffer stocks, food subsidy regime,
and allocation and distribution of food grains to weaker and vulnerable
sections of society through Targeted Public Distribution system (TPDS).
Timely
and efficient procurement and building up of adequate buffer stocks in the Central
Pool through efficient storage and movement of food grains are important
functions of the food security strategy of the GOI. Storage management and
movement of food grains, therefore, are important links in the whole system
from procurement to distribution of food grains to the consumers.
Procurement
of food grains for the Central Pool is carried out by agencies such as FCI, State
Government Agencies (SGAs) and private rice millers. In addition, 10 states and
UTs, which are presently under Decentralized Procurement (DCP) scheme, also
procure food grains for the Central Pool. The procured food grains are taken
over into the Central Pool by FCI, are stored in both its owned capacity and
hired godowns in different parts of the country. The function of distribution
of food grains to the consumers is carried out by the State Governments through
TPDS and OWS (Other Welfare Schemes). The food grains are also disposed of by
the FCI and State Governments based on allocation of the GOI through sale under
the Open Market Sales Scheme (OMSS).
FCI
is the only agency entrusted with the movement of the Central Pool food grains
from procuring and surplus states to deficit and consuming states. The movement
of food grains from the Central Pool is carried out by FCI through rail and
road transportation system across the country. The Table:1 given below shows a
comparison of movement of food grains by rail, road and water for the period
from 2006-7 to 2011-12. The movement of food grains by water mode in nil.
Table.1
(Govt. of India,
Ministry of Consumer Affairs, Food and Public Distribution, Report No.7 of
2013(Performance Audit), Report of the Comptroller and Auditor General of India
on Storage Management and Movement of Food grains in Food Corporation of India,
for the year ended March 2012.)
During
the above mentioned six year period, the rail movement constituted about 92%
and the remaining 8% was moved by road for short distances and between places
which are not connected by rail. Considering the present status of the heavily congested
rail/road transport network, a more effective, efficient and economic transportation
network, such as a road – sea – road combination with the longest leg being serviced
by coastal shipping is desirable. This case study deals with the multimodal
transportation of bagged food grains in marine containers from designated
depots of Kakinada (Andhra Pradesh) to designated depots in Kerala through
coastal movement via Kakinada and Cochin Ports.
2 Approach for Analysis
A
comparative assessment regarding the cost differential for moving rice in containers
from the FCI depots in Kakinada to the FCI depots in Cochin will bring out the
following facts :-
1. Approximate
cost for transportation of 25MT rice
from Kakinada depot to Cochin Depot by Rail .
2. Approximate
cost for transportation of 25MT rice from Kakinada depot to Cochin Depot by
road.
3. Approximate cost for transportation of 1 x 20’
container carrying 25MT rice from Kakinada depot to Cochin Depot by Coastal Shipping.
Apart
from providing an insight into the cost factor, the study also throws light on
other benefits the FCI would avail itself of by the containerized movement of
food grains.
3 Case Text
FCI
in Kerala Region receives on an average 15 lakh metric tonne of food grains
from central pool (wheat& row rice from Northern Region and Boiled rice
from Andhra Pradesh) per annum by rail, which is stocked in depots close to the
rail lines at various destinations and use road movement for further
distribution.
As
per the performance audit report by the Comptroller and Auditor General of
India (report no.7 of 2013 on storage, management and movement of food grains
in FCI) ,the FCI sustains huge monetary loss due to the shortfall in supply of
rakes by railways , inefficiencies in
the movement of food grain and other operational losses. Hence, the FCI has
initiated a pilot movement of 20,000 MT of bagged rice in containers on a
monthly basis through coastal shipping from Kakinada Port to Cochin Port to
check the feasibility of an alternative cost effective transportation mode to
improve the food grain movements and to reduce the losses.
Based
on the available data, a cost analysis has been done and it reveals that FCI
could save Rs.15,451.50 per MT , i.e. , Rs 1,23,612,00 per monthly allocation
of 20,000 MT (800x20’containers) on transportation cost by shifting the traffic
to coastal shipping.
Table.2
From
Cochin, as shown in the Table 3 given below, further distribution of rice could
be done by road to other nearby locations, wherever the FCI has its depots.
Table.3
Similarly,
by utilizing other minor ports of Kerala FCI could divert a sizable amount of
the grains movement to coastal shipping which is clean, green and cost effective.
If the current facility or shipment volume doesn’t justify direct call of a
coastal vessel to the non-major ports, the IWT mode (IV or RSV) could be deployed
from Cochin Port. A map, Fig. 2, showing the possible network options are given
below.
Source: Port
Department, Kerala
Fig:1
Networking
- FCI Depos with Cochin Port and other
Non-Major Ports of Kerala
4. Other benefits by diverting FCI
cargo to Coastal mode
As per the
performance audit report No.7 of 2013, by the Comptroller and Auditor General
of India on storage, management and movement of food grains in FCI for the
period 2006-’07 to 2011-‘12, the FCI loses heavily on transportation due to the
shortfall in supply of rakes by railways, inefficiencies in the movement of
food grain and other operational issues related to the movement. The FCI could
successfully overcome a number of issues enumerated below by shifting to the
containerized movement of food grains by coastal shipping.
i.
To overcome
losses due to shortfall in supply of rakes by Railways :
Due to operational constraints, Railways could not
supply rakes as per planned requirements of FCI and did not adhere to the
date-wise and destination-wise movement plan. As per the Table 4.4 given below,
supply of rakes by the railway shows variation ranging from 6% to 17%, which is
of major concern.
Table.4
Source :Govt of India, Ministry of consumer Affairs,
Food & Public distribution
ii.
To minimize
inefficiencies in movement of food grains.
According to the audit report, various inefficiencies
in movement of food grains by railways resulted in avoidable expenditure,
losses and delays in settlement of claims on account of the following reasons:
• Rebooking and diversion of railway rakes
– Rebooking
takes place when consignment is booked to any other station after it reaches
its original destination, while
diversion of consignment to other station is effected before it reaches its
destination station. In 2011-12 the expenditure was Rs.28.85 crore.This was mainly due to
non-availability of storage space at the original destinations and unplanned
diversions of rakes.
• Demurrage payment to railways – Delay
in loading and unloading of wagons attracts demurrage payment by FCI to
Railways.While
in respect of operations carried out on contract basis, demurrage for delays is
recoverable from contractors, FCI is responsible for demurrage relating to
operations carried out through its departmental labour. Average
expenditure due to demurrage was Rs.59.52 crore per year. Payment of demurrage charges showed
an increasing trend over the period from 22.73crore (2006-07) to 132.51 crore
(2011-12).
• Delay in reconciliation of missing and
unconnected wagons– Diversion of food grains wagons occurred both at the instance of FCI
and due to certain operational exigencies of the Railways. Diversion of wagons
at times resulted in unconnected or missing wagons for the receiving depots.
According to the reconciliation system followed in FCI, claims are lodged with
the Railways in case of non-delivery of the wagon, the liability of which lies
upon the Railways. Thereafter, a reconciliation of missing and unconnected
wagons is done by the Zonal Claim Cell (ZCC) of FCI with the respective Zonal
Railways. The un-reconciled missing and unconnected wagons are then taken up by
FCI headquarters with the Railway Board for match adjustment. In 2011-12
the value of missing wagon accounted to Rs.11.24 crore and value of unconnected
wagons was Rs.6.82 crore.
• Non-settlement of refund claims of freight-
Claims
of refund arise when the FCI has paid the Railways in excess of what was
actually due and claims should be lodged with the Railways for refund. Excess
payment of freight by FCI to Railways could be due to various reasons such as
erroneous calculation of freight, double payment of freight, diversion of
wagons /rakes, etc. In March 2012 the pendency of refund claims of freight
is accounted for Rs.58.11 crores and the audit also observed that the claims
lodged with Railways were pending for settlement for 1 year to 32 years.
• Excess payment of railway freight–As
per the audit report, a test check of cases for the period 2006-07 to 2010-11
revealed that the FCI continued to pay at higher slabs and this had resulted in
payment of excess freight to an extent of
Rs 3.47 crore for dispatches from Andhra Pradesh to various
destinations.
iii.
To eliminate
operational issues such as transit losses :-
Transit loss
is the difference between the weight dispatched by the consignor and the weight
received by the consignee which may occur during transit due to pilferage,
short loading of wagons, spillages, multiple handlings of bags, driage, etc.Audit observed that during
the six year period from 2006-07 to 2011-12 the financial impact of transit
losses over and above the target limit was Rs. 97.91 crore.
iv.
Incentives
for Coastal Shipping by Govt. of Kerala :-
Government
of Kerala is providing incentives for coastal cargo movement at the rate
of Rs.1 /ton/km vide GO (Rt) No
24/2013/F&PD dated 16-01-2013 (Annexure No:13 ). An additional incentive in
the form of rebate in port charges is also proposed for coastal cargo movement
along the Kerala Coast.
v.
Bunker
Rebate for Coastal Ships by Govt. of Kerala:-
Government
of Kerala reduced the tax (VAT) to 5% for the sale of furnace oil to coastal
ships as fuel vide notification no: GO (P) No 100/2014 dated 21-06-2014 . In the event of recent rail freight hike by
6.5%, this rebate would be a relief and expected to further reduce the
transportation cost of the grain movement by coastal shipping.
REFERENCES
1.
Deloitte
Touche Tohmatsu India Pvt. Ltd (2011), Preparation
of strategy road map cum action plan for development of coastal shipping in
Kerala , Final Report, prepared for The Directorate of Ports, Govt Kerala,
June 2011.
2.
Directorate
of Ports, Govt. of Kerala and Food Corporation of India (2013), Report on Reverine movement of food grains
to Kerala Region, December 2013.
3.
Govt.
of India, Ministry of Consumer Affairs, Food and Public Distribution, Report
No.7 of 2013(Performance Audit), Report
of the Comptroller and Auditor General of India on Storage Management and
Movement of Food grains in Food Corporation of India, for the year ended
March 2012.
