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Tarps cover sacks of wheat stored in the open behind a sign for the Food Corporation of India in Sonepat, Haryana, India, last month. NEW DELHI — About 50 kilometres from here, a stray dog walks among sacks of wheat rotting in a field. They are part of more than 3 million tonnes of grain — enough to feed Kenya — that India stores in the open exposed to pests and damp.

Simple plastic sheets at the site in Sonepat in Haryana state cover the sacks owned by Food Corporation of India, a government agency at the heart of the world's largest public food distribution program for the poor. As grains decay, 255 million Indians eat less than 2,100 calories daily, US Department of Agriculture data show.

Indian Prime Minister Narendra Modi is set to tackle the issue by setting up a panel to assess how to overhaul the 50 year-old Food Corporation of India, two government officials with knowledge of the matter said, requesting anonymity as the plan isn't public. Modi took power in May after vowing to revamp the agency, part of a sweeping economic agenda whose progress will be in focus at his Independence Day speech next week.

"Supposing you buy a bag of wheat for your own household consumption, would you store it in the open covering it with a polyethylene bag?" said Atul Chaturvedi, chief executive officer of agri business at billionaire Gautam Adani's Adani Enterprises. "If you're not going to do it for your own wheat, then why are we doing it for such a massive operation?"

Food Ministry spokesman N.C. Joshi declined to comment on the potential overhaul. Food Corporation of India Chairman C. Viswanath couldn't be reached for comment.

India's food security law entitles about two-thirds of its 1.2 billion people to low-cost grains. Modi plans to spend 1.15 trillion rupees (14 billion euros) on food subsidies in the year ending 31 March.

The challenge is to get the grains to the poor amid risks such as corruption and waste.

About 44 per cent of wheat and rice is diverted from beneficiary households, Reetika Khera, who studies food security at the Indian Institute of Technology Delhi, estimated in 2011. Ashok Gulati, who headed the Commission for Agricultural Costs and Prices, puts the figure at 40 per cent.

In Samalkha in Haryana, flies buzz around a bull lying at a storage site. In Karnal 50 kilometres to the north, discoloured grain spills from torn sacks. Three men who said they guarded the Karnal site told a Bloomberg reporter to stop documenting conditions there and leave.

Food Corporation of India had 68.7 million tonnes of wheat, rice, unmilled paddy and coarse grains on 1 July, more than double its requirement of 31.9 million tonnes, its website shows.

The agency's storage capacity is 39 million tonnes, including 3.3 million tonnes in the open under plastic sheets. India's states also keep Food Corporation of India stocks.

Covered warehouses owned by the agency can store 13 million tonnes as of 1 April, little changed from eight years ago. Countries such as the US and China make greater use of metal silos and India should follow suit, said Adani Enterprises' Chaturvedi.

Saving even 5 per cent of India's 264 million tonnes of annual food grain production from rotting would make a major difference, according to Chaturvedi. That proportion would be enough to meet Malaysia's rice and wheat demand for three years, calculations by Bloomberg using US Department of Agriculture data show.

"The problem is the open air," said Abdolreza Abbassian, senior economist for the UN's Food and Agriculture Organization. "If you're producing beyond consumption and you're therefore building inventory, you have to be cautious of the fact that you need to keep the good old extra grain in a safe place."

The election manifesto of Modi's Bharatiya Janata Party pledged to "unbundle" Food Corporation of India's procurement, storage and distribution activities for greater efficiency.

That could help curb food costs and consumer-price inflation that's averaged 9.1 per cent in the past year.

The government must also consider if the food security law enacted in 2013 needs reviewing, as part of a move toward cash welfare payments rather than grain distribution, said former agricultural commission chairman Gulati.

"You can't streamline this entire thing unless you do a rethinking of the Food Security Act itself," he said.

Proponents of cash transfers say they curb graft. While the government doesn't have data on how much food is stolen, some 39.3 million fake or ineligible ration cards were scrapped by 31 March, Raosaheb Patil Danve, India's junior food minister, said last month.

Modi swept to India's first single-party parliamentary majority in 30 years on an agenda that includes improving infrastructure, boosting energy output and fighting corruption.

Restructuring Food Corporation of India could be among the stiffest tasks as challenges include bureaucratic inertia and labor unions, according to Biraj Patnaik, principal adviser to India's Supreme Court on food issues.

"It may take three to four years," he said.

Pratik Parija and Prabhudatta Mishra – Bloomberg News
— With assistance from Andrew MacAskill in New Delhi and Thomas Kutty Abraham in Mumbai.
Bloomberg News photo by Prashanth Vishwanathan