Performance Audit on Storage Management and Movement of Food grains by the Food Corporation of India

A performance audit of how the Food Corporation of India stores and moves food grains, covering 2017-18 to 2021-22 — procurement and receipt, buffer stock, capacity utilisation, transit and storage losses, demurrage, economy of movement and computerisation, and action on earlier parliamentary committee and audit recommendations.

Audit period: 1 Apr 2017 — 31 Mar 2022
Presented: 7 Aug 2024

Findings

The corporation never used the railways' long term tariff contract policy, forgoing a ₹1,736.11 crore rebate on freight paid between 2017-18 and 2021-22, along with priority in rake allotment.
“FCI did not avail Long Term Tariff Contract policy for its movement of food grains through railways and as a result, it could avail the rebate of ₹ 1736.11 crore on the amount of freight paid during 2017-18 to 2021-22 besides priority in rake allotment.”Executive Summary
In Punjab and Haryana, 10.55 lakh tonnes of storage was hired even though the corporation had its own vacant open storage, costing ₹62.76 crore in avoidable storage and supervision charges.
“In Punjab and Haryana Region, there was avoidable hiring of 10.55 LMT and consequent avoidable expenditure of ₹ 62.76 crore towards storage and supervision charges due to hiring of capacity despite having own vacant CAP.”Executive Summary
Despite vacant capacity in Punjab and Haryana, the corporation did not take direct delivery of wheat from state agencies against it, and paid them ₹170.26 crore in avoidable carry-over charges.
“Despite availability of vacant storage capacity, FCI did not instruct SGAs for direct delivery of wheat equivalent to available vacant capacity. Although there was available vacant covered storage capacity and vacant CAP in Punjab and Haryana regions, the same was not used for taking direct delivery and as a result it incurred avoidable Carry over Charges of ₹ 170.26 crore paid to SGAs.”Executive Summary
Short despatch of 84.253 lakh tonnes from Punjab and 43.99 lakh tonnes from Haryana left the corporation bearing ₹182.29 crore of storage charges, while recipient states including Assam, Bihar, Jharkhand and Rajasthan had vacant space.
“Analysis of movement of stock (Wheat and Rice) ex-Punjab during 2017-18 to 2021-22 revealed that there was shortfall in planning of movement and actual despatch in 2018-19 and 2019-20 as compared to 2017-18 while there was vacant space available in recipient states like Assam, Bihar, Jharkhand and Rajasthan… Due to short despatch of 84.253 and 43.99 LMT (considering the quantity of 2600 Mt in one rake) in Punjab and Haryana respectively, FCI had to bear storage charges of ₹ 182.29 crore.”Executive Summary
There were no guidelines allowing food grains to be issued directly from railheads to state godowns; even 10 per cent direct issue would have saved ₹158.88 crore in the Jharkhand region alone over five years.
“In absence of any formal guidelines or instructions from Ministry or FCI HQ, direct issue of food grains from Railhead(s) could not be done except in few stray cases. Even a 10 per cent direct issue of food grains from Railheads to State Government godowns would have resulted in savings of ₹ 158.88 crore during 2017-18 to 2021-22 in Jharkhand region.”Executive Summary
Some grain issued through the public distribution system is never tested against food safety standards — stock stored under six months escapes testing, and wheat taken as direct delivery at railheads is moved to consuming regions untested.
“Some of the stock issued in PDS is not tested as per FSSAI norms as some stored stock which does not fall under the criteria mentioned ibid and is stored for a period less than six months before being despatched to the consuming regions escape such tests. Also, stock received as direct delivery of wheat from the SGA's at rail heads are transported to the consuming regions without tests under FSSA.”Executive Summary
₹17.02 crore of damages was never recovered from the silo concessionaire in Bihar and Haryana in breach of the contract, and an undue benefit of ₹5.83 crore was given through a reduced railway track cost in Assam.
“FCI did not recover damages/penalty of ₹ 17.02 crore from the concessionaire in violation of terms of the contract entered into for construction of silos in Bihar and Haryana regions. Similarly, undue favour of ₹ 5.83 crore was extended to the concessionaire in the form of reduced project cost of railway track in Changsari (Assam).”Executive Summary
Delay in acquiring land cost ₹18.08 crore extra in Assam, and in Bihar the corporation paid ₹16.85 crore extra in land cost for silos at Kaimur and Buxar without protecting its financial interest.
“FCI had to incur extra expenditure of ₹ 18.08 crore due to delay in acquiring the land for augmentation of storage capacity under Central Sector Scheme in Assam region. In Bihar region, FCI failed to protect its financial interests, as it had incurred extra expenditure of ₹ 16.85 crore toward land cost for construction of silo at Kaimur and Buxar.”Executive Summary
A silo was taken over at Sangrur in Punjab without a despatch facility, blocking stock that could not be moved out, and ₹6.95 crore spent between March 2020 and August 2022 was rendered unfruitful because a railway siding went unused.
“Taking over the silo without ensuring despatch facility has resulted in blockage of stock which could not be liquidated in Sangrur in Punjab region. Also, FCI could not make use of railway siding, casual approach rendered the expenditure of ₹ 6.95 crore incurred during March 2020 to August 2022 as unfruitful.”Executive Summary

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Performance Audit on Storage Management and Movement of Food grains by the Food Corporation of India

Findings

The corporation never used the railways' long term tariff contract policy, forgoing a ₹1,736.11 crore rebate on freight paid between 2017-18 and 2021-22, along with priority in rake allotment.

“FCI did not avail Long Term Tariff Contract policy for its movement of food grains through railways and as a result, it could avail the rebate of ₹ 1736.11 crore on the amount of freight paid during 2017-18 to 2021-22 besides priority in rake allotment.”Executive Summary

In Punjab and Haryana, 10.55 lakh tonnes of storage was hired even though the corporation had its own vacant open storage, costing ₹62.76 crore in avoidable storage and supervision charges.

“In Punjab and Haryana Region, there was avoidable hiring of 10.55 LMT and consequent avoidable expenditure of ₹ 62.76 crore towards storage and supervision charges due to hiring of capacity despite having own vacant CAP.”Executive Summary

Despite vacant capacity in Punjab and Haryana, the corporation did not take direct delivery of wheat from state agencies against it, and paid them ₹170.26 crore in avoidable carry-over charges.

“Despite availability of vacant storage capacity, FCI did not instruct SGAs for direct delivery of wheat equivalent to available vacant capacity. Although there was available vacant covered storage capacity and vacant CAP in Punjab and Haryana regions, the same was not used for taking direct delivery and as a result it incurred avoidable Carry over Charges of ₹ 170.26 crore paid to SGAs.”Executive Summary

Short despatch of 84.253 lakh tonnes from Punjab and 43.99 lakh tonnes from Haryana left the corporation bearing ₹182.29 crore of storage charges, while recipient states including Assam, Bihar, Jharkhand and Rajasthan had vacant space.

“Analysis of movement of stock (Wheat and Rice) ex-Punjab during 2017-18 to 2021-22 revealed that there was shortfall in planning of movement and actual despatch in 2018-19 and 2019-20 as compared to 2017-18 while there was vacant space available in recipient states like Assam, Bihar, Jharkhand and Rajasthan… Due to short despatch of 84.253 and 43.99 LMT (considering the quantity of 2600 Mt in one rake) in Punjab and Haryana respectively, FCI had to bear storage charges of ₹ 182.29 crore.”Executive Summary

There were no guidelines allowing food grains to be issued directly from railheads to state godowns; even 10 per cent direct issue would have saved ₹158.88 crore in the Jharkhand region alone over five years.

“In absence of any formal guidelines or instructions from Ministry or FCI HQ, direct issue of food grains from Railhead(s) could not be done except in few stray cases. Even a 10 per cent direct issue of food grains from Railheads to State Government godowns would have resulted in savings of ₹ 158.88 crore during 2017-18 to 2021-22 in Jharkhand region.”Executive Summary

Some grain issued through the public distribution system is never tested against food safety standards — stock stored under six months escapes testing, and wheat taken as direct delivery at railheads is moved to consuming regions untested.

“Some of the stock issued in PDS is not tested as per FSSAI norms as some stored stock which does not fall under the criteria mentioned ibid and is stored for a period less than six months before being despatched to the consuming regions escape such tests. Also, stock received as direct delivery of wheat from the SGA's at rail heads are transported to the consuming regions without tests under FSSA.”Executive Summary

₹17.02 crore of damages was never recovered from the silo concessionaire in Bihar and Haryana in breach of the contract, and an undue benefit of ₹5.83 crore was given through a reduced railway track cost in Assam.

“FCI did not recover damages/penalty of ₹ 17.02 crore from the concessionaire in violation of terms of the contract entered into for construction of silos in Bihar and Haryana regions. Similarly, undue favour of ₹ 5.83 crore was extended to the concessionaire in the form of reduced project cost of railway track in Changsari (Assam).”Executive Summary

Delay in acquiring land cost ₹18.08 crore extra in Assam, and in Bihar the corporation paid ₹16.85 crore extra in land cost for silos at Kaimur and Buxar without protecting its financial interest.

“FCI had to incur extra expenditure of ₹ 18.08 crore due to delay in acquiring the land for augmentation of storage capacity under Central Sector Scheme in Assam region. In Bihar region, FCI failed to protect its financial interests, as it had incurred extra expenditure of ₹ 16.85 crore toward land cost for construction of silo at Kaimur and Buxar.”Executive Summary

A silo was taken over at Sangrur in Punjab without a despatch facility, blocking stock that could not be moved out, and ₹6.95 crore spent between March 2020 and August 2022 was rendered unfruitful because a railway siding went unused.

“Taking over the silo without ensuring despatch facility has resulted in blockage of stock which could not be liquidated in Sangrur in Punjab region. Also, FCI could not make use of railway siding, casual approach rendered the expenditure of ₹ 6.95 crore incurred during March 2020 to August 2022 as unfruitful.”Executive Summary