The Department of Food and Public Distribution (DFPD) and the Food Corporation of India (FCI) signed a Memorandum of Understanding (MoU) for Financial Year 2026-27 (FY27) in New Delhi, establishing a comprehensive performance framework for FCI. The agreement sets defined annual targets to improve operational efficiency and strengthen organisational accountability. It reflects a continued push to modernise food grain management through measurable, outcome linked parameters.
What Is the DFPD FCI MoU for FY27?
A Memorandum of Understanding (MoU) is a formal agreement between two organisations that lists shared goals and responsibilities. In this case, the Department of Food and Public Distribution (DFPD), which functions under the Ministry of Consumer Affairs, Food and Public Distribution, is the administrative department, and the Food Corporation of India (FCI) is the implementing public sector body.
The MoU for FY27, which covers 1 April 2026 to 31 March 2027, lays down a comprehensive performance framework for FCI. The framework links FCI’s functioning to clearly defined annual parameters and targets. The Ministry of Consumer Affairs, Food and Public Distribution said the signing took place in New Delhi and is part of an annual exercise. A similar MoU was signed for FY26 on 23 September 2025, showing that this is a regular accountability tool rather than a one off event.
The core idea is simple. Instead of assessing FCI only after the year ends, the MoU sets expectations at the start of the year, tracks progress during the year, and evaluates outcomes at the end. This makes FCI’s performance measurable and outcome oriented and ensures that public funds used for food subsidy deliver maximum value.
Key Focus Areas of the Performance Framework
The MoU identifies specific operational areas where FCI must show improvement. These areas directly affect how well food grains are procured, stored, moved and preserved.
The framework focuses on reduction of storage losses, optimal utilisation of storage capacity, improvement in logistics and supply chain management, and strengthening of quality control mechanisms. Each of these is critical for a country that procures, stores and distributes hundreds of lakh tonnes of grain every year.
| Focus Area | What It Means | Why It Matters |
|---|---|---|
| Reduction of storage losses | Minimising weight and quality loss of grains during storage in godowns and silos | Even a small percentage of loss translates to thousands of tonnes and hundreds of crores, given the scale of operations |
| Optimal utilisation of storage capacity | Using covered godowns, silos and CAP (Cover and Plinth) storage efficiently without underuse or overcrowding | Helps cut rental costs of hired godowns and keeps buffer stocks safe |
| Logistics and supply chain management | Faster and cheaper movement of grains from surplus states like Punjab and Haryana to deficit states | More than 60 percent of procured stocks are moved between regions, so transport efficiency lowers cost and delays |
| Quality control | Regular inspection of grains as per specifications laid down by the government, both at procurement and during storage | Protects nutritional security and prevents distribution of substandard grain through the Public Distribution System |
Two additional pillars support these targets.
First, digitisation of business processes. The MoU places emphasis on wider use of modern Information Technology (IT) solutions to improve efficiency, transparency and monitoring. This builds on tools already in use such as the Depot Darpan Portal, which allows geo tagged uploading of infrastructure and performance data of depots, the ANNA DARPAN portal for end to end supply chain integration, the Central Food Procurement Portal (CFPP) as a single source for procurement data, and the Warehouse Inventory Network and Governing System (WINGS) and Vehicle Location Tracking System (VLTS) for inventory and movement tracking.
Second, capacity building and skill development for FCI employees. The MoU provides for training programmes so that staff can adopt new technologies and modern systems of food grain management. Without trained personnel, digital tools do not deliver results on the ground.
Together, these measures aim to promote efficient use of resources, strengthen transparency, and encourage technology driven solutions across the organisation.
Understanding the Food Corporation of India
The Food Corporation of India (FCI) is a Public Sector Undertaking (PSU) under the Department of Food and Public Distribution. It was set up on 14 January 1965 under the Food Corporations Act, 1964, enacted by Parliament. Its headquarters is in New Delhi, and it operates through five zonal offices and 26 regional offices across the country. The top official is designated as Chairman and Managing Director, usually an officer from the Indian Administrative Service (IAS).
FCI started with an authorised capital of ₹100 crore and equity of ₹4 crore. Its authorised capital was later raised to ₹21,000 crore, and paid up capital stood at ₹10,157.05 crore as on 31 May 2024.
Mandate and Main Functions
FCI is the main agency that executes the food policies of the Government of India. Its mandate includes four objectives set out in the Food Policy, to provide effective price support to farmers, to distribute food grains across the country for the Public Distribution System (PDS) and other schemes, to maintain satisfactory levels of operational and buffer stocks to ensure national food security, and to intervene in the market for price stabilisation through the Open Market Sale Scheme (OMSS).
Its day to day functions are purchase, storage, movement, distribution and sale of food grains on behalf of the government. Each year, FCI purchases roughly 15 to 20 percent of India’s wheat output and 12 to 15 percent of its rice output.
Procurement and Distribution Chain
Procurement is done at the Minimum Support Price (MSP) fixed by the government, within the Fair Average Quality (FAQ) specifications. Food grains are procured under two systems. Under the Centralised Procurement System (Non-DCP), FCI or state agencies procure and hand over stocks to FCI for storage and later issue. Under the Decentralised Procurement System (DCP), state governments themselves procure, store and distribute grains, handing over only surplus stocks to FCI. The number of states under DCP has grown to 17 for rice and 9 for wheat in 2023-24, compared to 10 and 5 respectively in 2014.
After procurement, FCI manages central pool stocks, moves them by rail and road, and issues them to state governments for distribution through Fair Price Shops (FPS) under the National Food Security Act (NFSA), 2013 and the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).
Scale and Finances
FCI’s scale is among the largest for supply chain management in Asia. It manages covered and CAP storage capacity of about 917.83 lakh metric tonnes (LMT) for central pool grains, along with steel silos of 22.75 LMT operational and 41 LMT under development. Annually, FCI moves about 400 LMT of grains on average, a figure that rose to about 600 LMT in 2020-21 and 2021-22 during the pandemic when free grain was distributed.
FCI’s operations are fully financed through the food subsidy released by the government. In FY26 (Budget 2026-27), the allocation for PMGKAY was ₹2,27,429 crore, about 97 percent of the Department’s budget. Food subsidy stood at about 0.6 percent of GDP in 2026-27. The economic cost for FCI in 2024-25 (Revised Estimates) was ₹28.5 per kg for wheat and ₹40.4 per kg for rice, covering procurement, storage and distribution.
FCI also resorts to short term borrowings such as Cash Credit Limit (CCL) of ₹6,000 crore, Short Term Loans (STL), Ways and Means Advance (WMA) of ₹50,000 crore, and Government Guaranteed Bonds of ₹36,700 crore as on 31 May 2024. Better treasury management, equity infusion of ₹10,700 crore in FY25 approved by the Cabinet Committee on Economic Affairs (CCEA), and asset monetisation of ₹6,088 crore by end of FY24 have helped reduce interest burden. Net storage loss improved from 0.17 percent in 2013-14 to a net gain of 0.22 percent in 2023-24, while transit loss fell from 0.46 percent to 0.16 percent in the same period.
The Department of Food and Public Distribution: Nodal Role
The Department of Food and Public Distribution (DFPD) is one of two departments under the Ministry of Consumer Affairs, Food and Public Distribution, the other being the Department of Consumer Affairs. DFPD is responsible for food security through procurement, storage and distribution of food grains and for regulation of the sugar sector.
DFPD frames procurement policy, fixes central issue prices, allocates grains to states, monitors buffer stock norms, and oversees FCI, the Central Warehousing Corporation (CWC) and the Warehousing Development and Regulatory Authority (WDRA). It also implements reforms such as the SMART PDS (Scheme for Modernisation and Reforms through Technology in Public Distribution System) from April 2023 to March 2026, the One Nation One Ration Card (ONORC) for national portability, the Depot Darpan Portal, and the Central Food Procurement Portal.
By signing an annual MoU with FCI, DFPD acts as the performance manager for its largest executive arm. The MoU translates broad policy goals like efficiency and transparency into annual, measurable actions such as how much storage loss must be cut, how fully silos must be used, and how quickly trucks and rakes must be tracked and turned around.
Why a Performance Framework Matters for India’s Food Security
India’s food security system rests on three pillars, enough production, enough procurement, and efficient distribution to those who need it.
Production reached a record 353.96 million tonnes of food grains in 2024-25 as per the third advance estimates. Procurement in Rabi Marketing Season 2025-26 was 300.35 LMT of wheat, benefiting 25.13 lakh farmers, while Kharif Marketing Season 2024-25 paddy procurement was 832.17 LMT, benefiting 1.18 crore farmers. Distribution under the National Food Security Act, 2013, which legally entitles up to 75 percent of rural and 50 percent of urban population (about two thirds of the total population) to subsidised grains, and its extension through PMGKAY from 1 January 2024 for five years, depends on FCI moving and preserving these grains without loss or delay.
The performance framework helps in three ways.
First, it protects farmer interests. When procurement and payment systems are digitised and tracked, farmers get timely MSP payments through Direct Benefit Transfer (DBT) under the One Nation, One MSP approach. Average payment processing time fell from 23 days to 8 days after the Bill Tracking System (BTS).
Second, it protects consumers. Better storage and quality control mean that grain reaching Fair Price Shops retains its weight and nutritional quality. Use of AI based Automatic Grain Analyzers, Mixed Indicator Method for raw rice age determination since 1 October 2021, and digitally integrated Quality Management System (QMS) labs reduces human error and rejections.
Third, it protects public finances. Food subsidy is the largest expense of DFPD. Every reduction in handling, transit and storage costs reduces the yearly bill. Measures such as high security cable seals meeting IS 17381:2021 from 1 January 2023, AI enabled video surveillance, mechanised handling and e Office covering 198 offices and over 12,000 users have already shown results, a 96 percent reduction in rakes with transit loss above 0.5 percent and interest cost savings of ₹411 crore in FY24 compared to FY23.
In short, the MoU makes FCI accountable not just for moving grain, but for moving it well, cheaply and transparently.
The Way Forward
The FY27 MoU sets the direction, but execution will determine outcomes.
FCI will need to accelerate adoption of steel silos, expand use of tracking systems like VLTS for GPS enabled vehicles, and close the gap between owned and hired storage by upgrading the remaining depots that are still rated low. Depot assessment shows only six of 489 FCI owned depots remained in 2 and 3 star categories after upgrades, work that must continue.
Greater digitisation of business processes will have to be paired with steady skill development, so that depot managers can use the Depot Online System (DOS) in about 1,900 warehouses, ANNA DARPAN and WINGS effectively.
Monitoring will rely on the measurable and outcome oriented approach written into the MoU. Quarterly reviews of the defined parameters, publishing of performance data on portals like Depot Darpan, and linking operational efficiency to subsidy utilisation will show whether storage losses, logistics costs and quality rejections are falling in FY27.
If these targets are met, the framework can make India’s food security architecture more resilient, a system where production gains are matched by storage strength and distribution speed, and where every rupee of food subsidy is traceable from procurement mandi to ration shop.
Key Takeaways
- The DFPD and FCI signed an MoU for FY27 in New Delhi to establish a comprehensive, measurable performance framework for FCI.
- The MoU focuses on reduction of storage losses, optimal utilisation of storage capacity, logistics and supply chain improvement, and quality control.
- It also mandates digitisation of business processes and IT solutions and capacity building for FCI employees to adopt new technologies.
- FCI was set up on 14 January 1965 under the Food Corporations Act, 1964, operates as a PSU under DFPD, and is headquartered in New Delhi.
- FCI’s FY26 PMGKAY allocation was ₹2,27,429 crore, with economic cost in 2024-25 at ₹28.5 per kg for wheat and ₹40.4 per kg for rice, and transit loss fell to 0.16 percent in 2023-24 from 0.46 percent in 2013-14.
