FOOD CORPORATION OF INDIA
A Brief History
The Food Corporation of India was set up under the food Corporation Act 1964 and on
14th January, 2013, FCI completed 49 years of its existence. FCI was set up to secure
strategic position in food grains trade and implement the National Policy for Price
Support operations, procurement, storage, inter-state movement and distribution
operations, in short to operate the Central Pool. Today FCI is the country leader in food
grains management and is fully focused on helping Farmers feed the country, better and
more efficiently, today and tomorrow.
Food constitutes the main requirement of every human being. In a sub-continent like
India where millions of mouths depend to targeted Public Distribution System(TPDS)
and other welfare schemes of
Govt. of India, FCI, plays a leading role in making food grains available to the extent of
30 lakh tones during a month, to respective State Govts. For its distribution among
beneficiaries. To procure, store, preserve and move such a huge quantity of stocks
spreading over vast areas with its intricate network is, indeed, a nerve and back-jerking
To nurture the Green Revolution, the Government of India introduced the scheme of
minimum assured price of food grains which are announced well before the
commencement of the crop seasons, after taking into account the cost of production
/inter-crop price parity, market prices and other relevant factors.
The food Corporation of India alone with other Government agencies provide
effective price. Assured for wheat, paddy and coarse grains.
FCI and the State Govt. agencies in consultation with the concerned State
Govts. Establish large number of purchase centers throughout the state to
facilitate purchase of food grains
Centers are selected in such a manner that the farmers are not required to
cover more than 10 kms. To bring their produce to the nearest purchase
centers of major procuring states. Price support purchases are organized in
more than 12,000 centers for wheat and also more than 12,000 centers for
paddy every year in the immediate post-gravest season.
Such extensive and effective price support operations have resulted in
sustaining the income of farmers over a period and in providing the required
impetus for higher investment in agriculture for improved productivity.
To name a few states about Rs.41,000 millions for paddy and 43000 millions
for wheat in Punjab
And Rs.45,000 millions for levy rice in Andhra Pradesh is paid to the
farmers/millers during wheat/rice procurement season
India today produces over 200 million tones of food grains as against a mere
50 million tons
In the last two decades, food grain procurement by Government agencies have
witnessed a quantum jump from 4 million tones to over 25 million tones per
Food grains are procured according to the Government – prescribed quality
Each year, the Food Corporation purchases roughly 15-20% of India‘s wheat
production and 12-15%of its rice production.
This helps to meet the commitments of the Public Distribution System and for
building pipeline and buffer stock.
To aggressively promote Decentralized Procurement by State Governments
with special emphasis in non-traditional areas and commodities.
To initiate procurement of non-MSP governed commodities on commercial
To ensure adequate buffer for meeting requirements under TPDS & Other
To dispose off surplus and un-storage worthy godowns and introduce
concepts of mechanized handling in the conventional godowns.
To undertake R&D for conversion of some of the existing capacity to bulk
and cost effective utilization of existing bulk capacity.
To optimize monthly movement programme with existing state of art of
computerization within the country at various locations as per corporate
policies and priorities.
Modernization of Quality Control equipments and systems for food
preservation in order to increase the shelf life of food grain.
To venture in the fields of Forward Trading and Exports of both surplus
stocks of food grains in Central Pool and no-traditional commodities.
To introduce state of art of financial management in order to reduce the
dependency on the present banking system in the country.
To initiate systems for settlement of storage loss and transit loss through
insurance coverage and revised inventory mechanism.
To develop efficiency in human resource management both in staff/officers
and workers with changed circumstances in the work approach of P.S.U. s.
To achieve state of art in computerized communication between different
offices/ depots throughout the country.
Fulfillment of all the targets set as per Govt. of India Food Policy
from time to time
Monitoring of quality in all major transactions, processes leading to
improve customer satisfaction level
Accountability for efficiency, responsiveness, performance and
minimization of all losses and wastes
Need based up-gradation of infrastructure and work environment
Need based enhancement of available knowledge and skills
Transparency in decision making, effective communication leading
to harmonious employee relations
Objectives of FCI
To provide farmers remunerative prices
To make food grains available at reasonable prices, particularly to
vulnerable section of the society
To maintain buffer stocks as measure of Food Security
To intervene in market for price stabilization
FCI, as the country‘s nodal organization for implementing the National Food Policy, is
committed to provide credible, customer focused services, for efficient and effective food
security management in the country. Our focus shall be:
Professional excellence in Management of food grain and other commodities
Service quality and stake holder orientation
Transparency and accountability in transactions
Optimum utilization of resources
Continual improvement of systems, processes and resources
Fulfillment of all the targets set as per Govt. of India Food Policy from time to
Monitoring of Quality in all major transactions, processes leading to improved
customer satisfaction level
Accountability for efficiency, responsiveness, performance and minimization of
all losses & Wastes
Need based up gradation of infrastructure and work environment
Need based enhancement of available knowledge & skills.
Transparency in decision making, effective communication leading to harmonious
Establishing, maintaining and improving ISO 9001:2000 based Quality
Management Systems covering all areas of activity.
Functional Analysis of the
SWOT ANALYSIS OF FOOD CORPORATION OF INDIA
Support from the central government
Strong network of distribution
Round the year availability of materials
Excellent storage management
High requirement of working capital
Corruption at all level
Inadequate automation with regard to information managemnt
Improvement in distribution level
Diversify into non-distributional commodities/activities
Vast domestic market
Entry of retail sector
Shift in food habits
DEPARTMENTAL LABOUR SYSTEM
Under this system, regular time scale of pay as given below are applicable to the
Table no. 1
*The pay scales are due for revision from 01.01.201
Apart from the above pay scales, statutory benefits of ex-gratia in lieu of Bonus, PLI,
CPF, Gratuity and Welfare benefits of various types of leaves, uniform, LTC, HBA,
Festival Advance, medical facility, L.T.C./Bharat Darshan, Children education allowance
etc are also extended to the workers. The Departmental Workers are given Minimum
Guaranteed wage for 21 days in a month in addition to 4 or 5 paid weekly offs even if
FCI is not able to provide any work or sufficient work to labourers for all the working
days of the month provided the worker has attended the work spot on all the working
days of the month.
DIRECT PAYMENT LABOUR SYSTEM (DPS)
This system is presently functioning in 219 depots. In this system, the workers are
paid piece rates on ASOR% basis, as in case of contractors. The Workers are paid actual
earnings on Piece Rate/ASOR% for the quantum of work done or the minimum
guaranteed wage, whichever is higher. The Piece Rate/ASOR %age is not applicable in
case of Ancillary labourers. The DPS workers have been given the benefits of CPF in
addition to the benefits of Ex-Gratia / PLI / Gratuity / Workmen‘s Compensation, Paid
Weekly Off, National Holidays, Sick Leave, Medical First Aid and Medical Facility
(Indoor/Outdoor) under ESI Act.
The minimum daily wages for ―A‖ areas as fixed under Minimum Wages Act by the
Government of India, Ministry of labour & Employment after every six months are
admissible to the workers. The Piece Rate/ASOR% are revised every six months based
on the changes in All India Consumer Price Index. The present rates of Min. Wages &
Piece Rates are as under:-
*Next Revision due from 01.04.2013
NO WORK NO PAY SYSTEM (NWNP)
This system is popularly known as ‗No Work No Pay‘(NWNP) System or Three
Member Committee(TMC) System. The system is presently prevailing in 83 functional
depots throughout the country. Under this labour system, payment for the actual quantum
of work done is made on the basis of prevailing Piece Rate/ASOR% of the region or the
minimum guaranteed wage, whichever is higher. However, payment is made only on the
days when there is actual work available in the depot. In addition, the benefits of EPF,
Ex-Gratia in lieu of Bonus, three national holidays, paid weekly off under Minimum
Wages Act, Medical facility(Indoor/Outdoor) under ESI Act are extended to these
The minimum daily wages as fixed under Minimum Wages Act by the Government of
India, Ministry of labour & Employment every six months are admissible to the Handling
Labour. The Piece Rate/ASOR% is revised every two years based on the changes in All
India Consumer Price Index. The present rates of Min. Wages area-wise are as under:‗A‘ Area - 279/‗B‘ Area - 231/‗C‘ Area - 186/
Distribution of Food grains
The national objective of growth with social justice and progressive improvements in the
living standards of the population make it imperative to ensure that food grain is made
available at reasonable prices.
Distribution of Food Grains
Public Distribution of food grains has always been an integral part of India?
Overall food policy. It has been evolved to reach the urban as well as the rural
population in order to protect the consumers from the fluctuating and escalating
Continuous availability of food grain is ensured through about 5 lakh fair price
shops spread throughout the country.
The Govt. of India introduced a scheme called Targeted Public Distribution
Scheme (TPDS) effective from June, 1997.
Remote Hill Areas
Below Poverty Line (BPL): Determination of the families under this category in
various states is based on the recommendation of the Planning Commission. A
fixed quantity of 35 Kg. food grains per family per month is issued under this
category. The stocks are issued at highly subsidized Price of Rs.4.15 per Kg. of
wheat and Rs. 5.65 per Kg. of rice.
Antyodaya Anna Yojna - During the year 2000-2001 Govt. of India decided to release
food grains under Antyodaya Anna Yojna. Under this scheme the poorest strata of
population out of earlier identified BPL population is covered. Food grains are being
provided to 2.5 crores poorest of the poor families out of the BPL families at highly
subsidized rates of Rs.2/- per kg. of wheat and Rs.3/- per kg. of rice by FCI. This is the
biggest food security scheme in the world.
Above Poverty Line ( APL) ? Families which are not covered under BPL are
placed under this category. The stocks are issued at Central Issue Price of Rs. 6.10
per Kg. of wheat and Rs. 8.30 per Kg. of rice.
The Central Issue Price (CIP):
BPL Families APL Families
01- 07- 2002
Rice Common 01- 07- 2002
Rice Grade-A 01- 07- 2002
(*): Applicable to J&K, Himachal Pradesh, Sikkim, Uttaranchal and NE States.
Table No. 3
There are number of other welfare schemes of the Govt. of India :
(a)Mid-Day-Meal-Scheme (MDM)- The Govt. of India have introduced MDM ?
National Programme of
Nutrition Support to Primary Education in Primary Schools
w.e.f. 15.8.1995. Under the scheme every students upto 5th class of Govt. schools is
entitled for 3 Kgs. of wheat/rice per month @ 100 Grams.
Since October 2007 allocation of food grains have also been made for the students from
6th to 8th class in the educationally backward blocks and every student is entitled for 150
Grams of food grains per child per school day.
The Scheme is partly run by Govt./Aided Schools/Local Bodies to serve free cooked /
processed hot meal. FCI is supplying food grains free of cost to the State/UTs. This
scheme is partly financed by Ministry of HRD.
(b)Wheat Based Nutrition Programme (WBNP) - A scheme run by Department of
Women and Child Development, Ministry of Women & Child Development for
providing nutritious food to children below 6 years of age and expectant/lactating
women. Food grains supplied by FCI at BPL rates.
(c)&(d) SC/ST/OBC Hostels & Welfare Institutions & Hostels- The Ministry of
CAF&PD and the Ministry of Social justice & Empowerment coordinate to monitor of
the Scheme for providing food grains to SC/ST/OBC Hostels. Hostels having students
belonging to SC/ST/OBC categories are eligible to draw 15 Kgs. Food grains per resident
The Government of India decided that w.e.f. 2.11.2000 food grains (wheat/rice) will also
be allotted to the state Governments at the rate of 5 Kg per head per month for indigent
people living in Welfare Institutions, such as. Beggar Homes, Home for Nari Niketan etc.
sponsored by the State Govts. and the concerned administration. Food grains are supplied
by FCI at BPL rates. It may be clarified that from the year 2002-03, the MOCAF&PD has
been making the requirement of the State/UT under the head "Welfare Institutions
&Hostels" to meet the requirement of the State/UT for providing food grains to different
type of welfare institutions. Since April 2005, the Ministry of CAF &PD has enhanced
quota of allotment under this scheme to 5% of the monthly allotment made under BPL &
AAY. Presently, the food grains is being allotted by MoCAF&Pd on the basis of average
offtake during last three years under the scheme.
(e) Annapurna Scheme- Indigent Senior Citizens of 65 years of age or above eligible for
National Old Age Pension under NOAPS, but not getting pension can get 10 Kgs of food
grains per month. FCI is issuing food grains under this scheme to State/UT Govts. at BPL
Under This scheme of Ministry of Social Justice & Empowerment, Indigent people living
in Welfare institutions like Beggar Homes, Orphanages, Nari Niketans etc. are given 15
kgs of food grains per person per month. Food grains are supplied by FCI at BPL rates.
Presently, the scheme is being run by the Ministry of CAF&PD.
(f) Sampoorna Gramin Rozgar Yojana- A scheme financially supported by Ministry of
Rural Development in which food grains are supplied to the States/ UTs by FCI free of
(g)Special Component of Sampoorna Gramin Rozgar Yojna - Under the Special
component of the SGRY financed by Ministry of Rural Development for augmenting
food security through additional wage employment during natural calamity. FCI release
food grains free of cost to the State/UTs.
Since 1st April 2008 no allotment of food grains has been made by the Govt. of India
(h)Food grains to Adolescent Girls Pregnant and Lactating Mothers (AGPLM). GOI
introduced this Scheme w.e.f January, 2003 Under this scheme food grains is being
supplied by FCI at BPL prices to the State/UT Govt. for Adolescent Girls, Pregnant and
Lactating Mothers (AGPLM). The identified under nourished woman/girl is provide 6
Kg. of food grains (wheat/rice)/month. The scheme is partly supported by Planning
Commission. The scheme is being run by MoCAF&PD with the new name Nutritional
Programme for Adolescent Girls (NPAG).
(i)World Food Programme (WFP) - FCI is sparing stocks to WFP projects from the
Central Pool stocks as and when required by them. FCI is working as 'FOOD BANK' for
World Food Programme(WFP) projects in India . When India was deficit of food grains,
WFP used to get stocks to meet the deficiency through import.
(J) Emergency Feeding Programme - Under this scheme, Ministry of CAF & PD
releases allocation of rice at BPL rates, for KBK Districts (Bolangir, Kalahandi, Koraput,
Malakangiri, Nabarangpur, Naupada, Rayagada & Sonepur) of Orissa State on monthly
basis. Under this scheme, rice @ 7.5 kg/beneficiary/month is issued for 2 lakh
beneficiaries. This programme is being run by the Ministry of CAF&PD.
(k) Grain Bank - This scheme provides Grants for establishment of village Grain Bank
to prevent deaths of Schedule Tribes specially children in remote and backward tribal
villages facing or likely to face starvation and also to improve nutritional standards. The
scheme provides funds for building storage facility, procurement of weights & measures
and for the purchase of initial stock of one quintal of food grains of local variety for each
family. The allocation of food grains was made by the GOI, Ministry of Tribal Affairs
during the year 2002-2003. Under this scheme food grains are allotted to States at BPL
rate. Since 2006-07 the scheme is being run by Ministry of CAF&PD. The cost of food
grains as food component is being paid to FCI in advance at economic cost. State Govts.
are lifting food grains free of cost from FCI.
(l) National Food for Work Programme - this programme has been launched by the
Prime Minister during November 2004 for providing food grains in identified 150 most
backward districts of the country. The beneficiaries of this programme are labourers
engaged by the State Govt. in development work. Food grains is given as part of wages
under the scheme to the rural poor at the rate of 5 kg. per manday. More than 5 kg. food
grains can be given to the labourers under this programme in exceptional cases subject to
a minimum of 25% of wages to be paid in cash. Under this programme food grains ae
issued to states/UTs free of cost. This scheme is mentored by Ministry of Rural
Requirement for short term loan
Keeping in view the periodic increase rate of interest by the consortium of the Banks as
well as to raise additional resouirces to meet the requirement of funds at the time to Peak
procurement, the corporation is taking steps for availing alternative sources of finance
through Short Term Loan to achieve the twin objective of reduction in interest cost and
improving the liquidity.
As per stated above there are few ways to get the funds-like STL, BONDS, ect. Through
this Project, we come to know, how to raise funds through short term loans. What is the
procedure and the criteria and from whom they take the permission.
Average Bank Borrowing during 2007-08
Rs. 27327 Crores
(Consortium of 65 Banks as on 31.3.08)
Commercial Borrowing (Bonds)
Rs. 8605 Crores
Rate of Interest on Bank Borrowing w.e.f.
10.15 % p.a. (Monthly Compounding)
Rate of Interest on Bonds
Equity Released for Plan Schemes and Working Capital (as on 31.03.08)
Total paid-up Capital
Economic Cost of Food grains of FCI
Food Subsidy Released to FCI and Incurred by FCI (Rs. Cr.)
Food subsidy released to FCI
Food Subsidy Incurred by FCI
during the year
TABLE NO. 9
CASH FLOW (RABI)
The Food Corporation of India has been set up under an Act of Parliament
Provide price support to farmers to ensure remunerative prices for
Make available food grains at reasonable price to consumers,
particularly the vulnerable sections of the society and
Maintain buffer stocks as a measure of food security not only to
impart inter-seasonal stability but also to meet the emergent
situations arising out of crops failure due to drought, floods, etc.
To achieve the above objectives, the Corporation undertakes procurement,
storage, movement and distribution of Central Pool stocks on a massive scale.
The working capital required for these gigantic operations is provided by a
consortium of banks constituted by RBI under the leadership of SBI.
quantum of working capital requirement for the ensuing Rabi food grains
operations has been projected keeping in view the policies of the Govt. announced
from time to time. The gross out flow of funds for this purpose is estimated at
Rs.46400.15 crores against inflows of Rs.54509.76 crores during April, 2010 to
September, 2010. The details are given in the following paragraphs.
The Govt. of India has issued a single default guarantee of Rs.34495 crores
(enhanced from Rs.33100 crores) to SBI w.e.f 07.05.2007 and valid up to
31.03.2008, the validity of the guarantee was subsequently
31.03.2012 vide Govt. of India‘s letter No. 5-4/2007/SC-II dated 23.02.2010
covering the entire food credit of the Corporation. The State Bank of India
authorizes the monthly drawing power of the Corporation equivalent to value of
stock. For borrowing beyond the value of stock SBI levies penal interest @0.5%
on the amount of excess borrowing.
CURRENT CASH CREDIT UTILISATION:
The monthly Credit limit/ drawing power used to be authorized to the Food
Corporation of India by the Reserve Bank of India upto April, 2005. Thereafter
RBI stopped authorizing the credit limit, subsequently the Reserve Bank of India
vide letter dated 2.09.05 has informed that henceforth State bank of India will
take care of the credit requirements of the Corporation. Thereafter the State Bank
of India started authorizing monthly Credit limit/ drawing power of the
Corporation based on the value of stock. The drawing power was fixed by SBI at
Rs.17966.91 crores for the month of February, 2010. The Cash Credit Utilization
at the end of March, 2010 is estimated at Rs.24616.61 crores.
3.8 PROCUREMENT/ TAKEOVER OF WHEAT
4.1 The table below shows market arrivals and procurement of wheat for Central
Pool including under de-centralized system during the last five years.
Qty. Lakh Tonnes
Table no. 10
Revenue expenses for the six month period have been assumed at Rs5304 crores
based on the FCI's budget estimate for 2010-2011.
3.8.2 INTEREST ON BANK BORROWINGS:
The interest provision for food credit has been considered at current rate of
10.25% at monthly rest.
3.8.3 FOOD SUBSIDY:
The food subsidy to the extent of Rs26000.00 crores is estimated as receivable
during the first six months' period of the financial year 2010-11.An advance of
Rs.10,000/- crores ,as per comments of Ministry of Finance , at an average
interest rate for 364 days T Bills could be provided from 2010-11 and adjustment
during the financial year itself against the provisions made in the Budget 2010-11
for Food subsidy.
10.1 The estimated value of stocks at acquisition cost as on 1st April 2010 visa-vis actual as on 1st April'2009 is as under :Qty. In Lakh Tonnes
As on 1.4.2009
As on 1.4.2010
Table No. 11
The estimated fund requirement for food grains operations from 01.04.2009 to
30.09.2009 is as follows:Total
For Quarter ending
I) For purchase of Wheat
including takeover from State
II) For procurement of Levy
IV) Interest on bank borrowing
V) Interest on Bonds
VI)Interest on short term loan
Rice including Paddy and CMR
takeover from State Agencies.
III) For meeting the revenue
expenses other than the bank
VII)Repayment of short term
VIII) Carryover Charges of
IX)Repayment of Bonds
For Quarter ending
Table no. 13
NET FUND FLOW:
The bank overdraft is estimated at Rs.24616.61 crores as on 31st March 2010
after adding interest for the month ending March 2010. Monthwise estimated
fund flow during the period ending six months April/September 2010 is given
CCash Credit at Drawings
of the month
R Rs. Crore
the the month
Summary Cash Flow forecast for the period from 1st April, 2010 to 30th September
2010 is given in
CASH CREDIT LIMITS REQUIRED:
As per the estimates given in foregoing paras the operating cash credit limit
required from April 2010 onward would be as under:-
The cash credit limits indicated above may be considered by the State Bank of India
for sanction for Rabi, 2009 subject to usual review on monthly basis.
CASH FLOW (KHARIF)
The Food Corporation of India has been set up under an Act of Parliament
to provide price support to farmers so that they get remunerative prices
for their produce,
to make available food grains at reasonable price to consumers,
particularly to the vulnerable sections of the Society and,
to maintain buffer stocks as a measure of food security not only to
impart inter seasonal stability but also to meet the emergent situations
arising out of crops failure due to drought, floods, etc.
To achieve these objectives, the Corporation undertakes procurement, storage,
movement and distribution of food grains on a massive scale. The requirement of
working capital for these gigantic operations is met by the consortium of banks led
by SBI under the directions of the Reserve Bank of India.
The quantum of
working capital requirement for the ensuing Kharif food grains operations has been
projected keeping in view the policies of the Government announced from time to
time. The gross outflow of funds for thispurpose is estimated at Rs.56169 crores
against inflows of Rs.32854 crores during October, 2009 to March, 2010.
The Govt. of India has issued a single default guarantee of Rs.34495 crores
(enhanced from Rs.33100 crore) to SBI w.e.f. 07.05.2007 and valid up to 31.03.10
covering the entire food credit of the Corporation. The State Bank of India is
however still fixing the drawing power of the Corporation equivalent to value of
stock , which is resulting in charging of penal interest on drawing in excess of
stock value inspite of the full security being available in the form of Govt.
CURRENT CASH CREDIT UTILISATION:
The Cash Credit limit authorized to the Food Corporation of India by the Reserve
Bank of India was Rs.30348 crores (up to April, 2005). The Reserve Bank of
India vide its letter dated 2.09.05 has informed that henceforth State bank of India
will take care of the credit requirements of the Corporation. Accordingly, the State
Bank of India has authorized the Cash Credit Limit of Rs.18972.40 crores for the
month of August, 2009.The actual Cash Credit Utilization at the end of August,
2009 at Rs.16902.75 crores
The revenue expenses for the six months period have been projected at
The interest on bank borrowings has been considered at 10.25% up to the
value of projected stock to be held by the Corporation for the period Oct. 09 to
Off take :
The issue of Wheat and Rice has been projected at 63.91 lakh tonnes and 109.93
lakh tonnes respectively during the period Oct. 09 to March 2010.
The Food Subsidy to the extent of Rs.17719 crores receivable during the next
six months period has been considered.
The stock with FCI as on 31.3.2010 and the value thereof at
average acquisition cost is estimated as
Qty.-Lakh TonnesRate-Rs. per Qtls.
Table no. 16
b. The month end stock levels of wheat and rice from October, 2008 to
September, 2009 and the expected stock level during the period from
1.10.2009 to 31.3.2010
The estimated gross fund requirement for food grains operations from
1.10.2009 to 31.3.2010 will be as follows :Amount Rs. Crore
Takeover of wheat
(including Paddy, Levy
For meeting revenue
expenses other than
Carry over charges on
Re-Payment of Short
Repayment of Bonds
Interest on Bank
Interest payable on
Interest payable on Short
Amount Rs. Crore
Quarter ending Quarter
December 2009 ending March
Sale of Food grains
Subsidy from Govt. of
Receipt from Short
Table No. 18
Net Fund Flow:
The Bank borrowing is Rs.15741 crores as on 1.10.2009 (after adding interest
for the month ending Sept., 2009). Monthwise estimate of fund flow during
the period October, 2009 to March, 2010 is given below :Amount Rs. Crore
Cash Credit at the
during the cash credit
Cash Credit Limit Required:
As per estimate given in the foregoing paragraphs, the cash credit limit
required from October, 2009 onward would be as under :
The measurement of profitability is a tool of overall measurement of efficiency an
overall study profitability of FCI has been Dade in relation to sales operating assets
capital employed and its net worth.
By analysis the working result i.e. Profit and loss account of FCI. It was found that
the net profit before interest and tax of the FCI is showing increasing trends. This is
very good for FCI. The increase in the profits is nearly 24% more then previous year
the reason is good sales growth between years. For this following suggestion should
Proper cost control is required and cost control technique should be adopted for
Operating expenses, admn. Expenses should be specially considered to be
Inventory is the biggest items of balance sheet that must have demanded a
large amount of maintaining cost. So efficient inventory management should
be done. Inventory should be reduced extent that would help to recover
blocking money in inventory.
The service staff should be given proper training and better environment for
Proper advertisement and sales promotion is required.
Dairy has to pay large fix interest charged. Hence long term borrowing should
be reduced so that the earning are satisfactorily earmarked with them.
In the year 2006-2007 the growth in working capital was 43.33%As compare
to the year 2005-2006 similarly working capital in the year 2007-2008 has
grown to 100.03% as compared to the working capital in the year 2005-2006.
The management should follow the same trend in near future too so to
have considerable appreciation in working capital every year.
The Current Ratio for the year 2007-2008 has taken the Value of 2.01:1, which
is very satisfactory and as per the standard required (2:1).The current ratio of
2.01:1 indicates, that for every Rs 1 of current liability the company Rs 2 of
current assets, which indicates more liquidity and hence more amount of
working capital. The company need to further enhance the value of ratio.
Quick ratio for the year 2008-09 is above the ideal standard (1:1). It is 1.04:1,
which indicates that for every Re1 of current liability the company has Rs 1.04
of current assets, hence the company is in sound position in terms of working
capital position. It would be better for the company if in near future it
could further enhance the value of the ratio
Absolute quick ratio for the years right from 2005 up to 2008 are close to the
standard. For year 2007-08, the ratio is well above the standard (0.5:1), which
indicates the healthy picture of the company in terms of availability of
working capital (quick assets) in order to meet current liabilities. The same
position should be sustained in near future too.
• As compared to year 2005-2006, in the year 2006-07, the inventory turnover
increased to 8.19 times. Similarly, in the year 2007-08 it increased to 8.59
times, which indicates that the times taken in converting raw material into
finished product and finally selling it got reduced considerably and hence
indicates quick release of working capital. In near future it would be more
profitable for the company, if the value of ratio gets increased to 11- 14%.
Analysis of working capital
Analysis of working capital is an essential part of financial management. If there is
an adequate amount of working capital and it is utilized in the right manner, it is a
great achievement for the business. The excess of working capital causes financial
stringency and brings the business to a standstill.
Realizing the impotence of working capital in financial management the analysis of
working capital becomes an essential phenomenon. It facilitates the adequacy and
management of working capital. The management of working capital provides a
careful inquiry into its components so as to control the working capital and to
conserve it properly. It helps in determining the optimum level of working capital in
the firm. The process of measurement and analysis of working capital is performed on
the basis of financial statements of the business enterprise for past few years.
In the present study the analysis of working capital of FCI ltd. Has been made by two
techniques vis., trend analysis and ratio analysis.
Working Capital Turnover
A measurement comparing the depletion of working capital to the generation of sales
over a given period. This provides some useful information as to how effectively a
company is using its working capital to generate sales.
A company uses working capital (current assets - current liabilities) to fund operations
and purchase inventory. These operations and inventory are then converted into sales
revenue for the company. The working capital turnover ratio is used to analyze the
relationship between the money used to fund operations and the sales generated from
these operations. In a general sense, the higher the working capital turnover, the
better because it means that the company is generating a lot of sales compared to the
money it uses to fund the sales.
WORKING CAPITAL RATIO OF FCILTD. DURING 2005 TO 2008
Inference: In spite of an increase in Net Working Capital, the Working capital
turnover ratio of FCI got reduced to 10.8 times in the year 2006- 2007, as compared to
the year 2005-07. Similarly, in the year 2007-08, the working capital turnover ratio
further reduced to 8.8 times as compared to 13.24 times in the year 2005-06. The
reduction in working capital turnover ratio is on account of massive growth in net
working capital as compared to a slight growth in the sales of the company.
Review of Literature
(Gould, Marie, 2008) This article focuses on business finance and how it relates to
the corporate and non-profit sectors. In order for organizations to be successful, they
must create a strategic plan that will position the firm for growth and competitiveness.
The senior management team will need to analyze all data, including the financial
records, to ensure that the organization can make a profit, remain competitive and be
in position for continued growth.
(Newman, Kara, 2007) This article explores the barriers to benchmarking in
corporate treasuries when the metrics of goal setting in this area show clear
improvements in financial performance. Research conducted by Thompson Financial
and a treasury management magazine revealed that motivation for benchmarking
could be driven by evidence linking attention to treasury operations and competitive
gains. Other companies are motivated by needed cost controls or client expectations.
The four key functions likely to be measured are cash management working capital
management, forecasting and bank relationship management.
(Flanagan, Brian, 2005) Presents advice on working capital management.
Components of working capital , namely inventory, receivables and payables;
Strategies to manage debtors; Sources of additional working capital; Improvement of
cash flow; Early warning signs of overtrading; Collection of receivables.
(Bah & Dumontier, 2001) Large corporations have a need to establish guidelines for
financial planning and policy. The guidelines are needed because Corporations are
typically managing large amounts of money and have obligations to employees and
stockholders to carefully manage the money that is generated within the company.
These obligations require corporations to employ internal and external financial
experts to develop and implement financial decisions such as financing, investment,
dividends and maximizing the use of funds created. Experts have postulated a
relationship between financial policy and the ability to create wealth for stockholders.
(Wilson F. Payne, 1961)
Discussion of the relative utility of the two records has
concerned problems which focus upon the corporation entirely apart from the social
organization in which it is a very active member. In recent years, several economists
have given their attention to social accounting, a discipline growing out of traditional
stock-flow concepts and looking toward the perfection of income-and-condition
reports for each of the several sectors of the national economy—income recipient,
financial, Pro- ducker, etc.
Establishment of FCI
The Great Bengal Famine of 1943- the worst in the history of India weaked havoc.
There was no buffer stocks of grain, no coordinating body to execute the emergency
plans and thousands of people perished. Four years later at the stroke of mid night of
August 15 1947, India became a free country. Independence was accompanied with
the gigantic task of feeding millions of the second most populous country in the
world. Then government pledged to win the war against hunger.
A massive national effort to attain self- sufficient through the use of high yielding
varieties coupled with scientific farming opened doors to a Green Revolution. To
equip the country with all the important food security, it was necessary not only to
provide an impetus to farmers to grow more crops through the use of seeds and inputs
such as fertilizers, irrigation, pesticides, modern agriculture implements but also
provide a price assurance system.
Thus was born the Food Corporation of India in 1965 as the public sector marketing
agency to provide the link between producers and consumers. It was intended to
secure for the government a commanding position in the food grain trade. By 1979
FCI was operating in all the states as a sole agent of central government in food grain
procurement. In its years of service to the nation, FCI has played significant role in
India‘s success in transforming the crisis management oriented food economy into a
stable food security system.
Working Experience in FCI
The working environment of FCI, Shaktinagar is quite supporting and encouraging.
Different departments seek to help each other whenever the need arises. There is a
strong bond between people and various departments existing over there. People work
together towards the attainment of mission of FCI and try to maintain the supply of
food grains effectively and efficiently.
Difference between Allocation and Lifting Of Food Grains
Under certain programmes and yojnas there is a huge difference between allocation
and lifting of food grains like in TDPS, ST/ ST/ OBC Hostels & Welfare Institutions
and various others. Government should take necessary measures to overcome this.
Liquidation of Lower Category Food Grains
The government of India, Ministry of CA, F& PD from 1997 onwards has authorized
FCI to liquidate both the surplus issuable stocks and non- issuable stocks through
tender/ open sale.
The non- issuable to TDPS and surplus stocks of food grains and coarse grains being
liquidated as per the decisions taken by the High Level Committee of FCI during its
meeting from time to time.
Few rapid measures should be adopted so as to minimize the losses.
The fund management of corporation is good. Corporation allocates its fund as
per government policies and norms.
There is a time gap between debtors and creditors. And it‘s a good health sign
for a corporation. Because a corporation can invest for short term and earn
Firm made its payment through NEFT and RTGS by this a firm can made
payment quickly and there is no need of paper work.
As corporation uses JIT policy for inventory. That‘s why there is very less
chances for obsolescence of inventory.
Objective of study
Conceptual: To gather the financial statements related to inflows and outflows of funds in food
corporation of India and to know how and where they are used.
Factual :Present earning capacity and profitability of FCI Ltd Short term liquidity
and long term financing
Financial stability of business
To judge the availability and effective use of working capital.
Following were some of the limitations faced during the training in completely
understanding the various processes & operations:
1. Insufficient information supplied by the corporation.
2. Conservativeness of the corporation.
3. Godowns & other storage locations are far away from the Head-Quarter,
making it difficult to collect all the necessary information regarding actual
procurement & storage status.
4. The staff of the department of finance was due to work over-load, too busy to
spend enough time, in helping in the preparation of the project.
5. In the corporation, there is top-level secrecy in matters concerned with
Financial analysis is analysis of financial statements of and enterprise. Financial
statement reorganized collection of data according to logical and constituent
accounting procedures. However financial statements in their traditional from giving
historical data and information are of little us to these who use them to draw certain
Financial appraisal is scientific evaluation of profitability and financial strength of
any business concern. Financial appraisal techniques include ration analysis common
size analysis trend analysis, fund flow analysis etc. these techniques may be applied in
the financial appraisal of any entity and FCI Ltd. Is no exception to it.
I.M.Pandey, (1978), financial management, Ninth addition, UBS Publication
Van Horn,(2002),Financial Management and Policy,12th edition, Publisher
Dorling Kindersley India ltd
Horne Wwachonicz, J.R.Bhaduri (2005), Fundamentals and Financial
management, 12th edition, Pearson publisher.
MY Khan, P.K.Jain (1981), Financial Management,5th edition, Publisher Mc
Graw hill companies.
http://fciweb.nic.in/articles/org ( July 18, 2013)
http://www.fcidelhiro.in/fci_delhi.php (July 21, 2013)
http://www.scribd.com/doc/2069/Food-Corporation-Of-INDIA (July24, 2013)
http://en.wikipedia.org/wiki/FCI ( August 14, 2013)