Elephants can dance

Ask a man on the street about the Food Corporation of India (FCI), and the instant reaction will be that FCI is the epitome of both corruption and inefficiency. But how would you react to the news that later this month, FCI will be getting an ISO 9000 certification, which shows its procedures are top class?

That it has already computerised 1,400 of its 5,000 godowns and linked them to the head office (all will be done by September), and now has an up-to-date information on inventory in the system and tracking of where foodgrains are coming from and being dispatched.

FCI is negotiating a MoU with commodity exchange NCDEX to offer use of its godowns in the four months of the year that they lie empty, and in addition, various other services like help in designing contract specifications of foodgrains as well as quality assurance systems.

All this while, over the past three years, the amount of grain that FCI is handling has more than doubled to around 12,000 rakes today — since one rake contains 46,000 bags of 50 kg each, that’s a total of over 55 crore bags, each travelling over an average distance of 1,500 kilometres!

Meet V K Malhotra, the 1970-batch IAS officer, under whose tenure much of this has happened. As managing director for FCI for 18 months before he became chairman and managing director in December last year, Malhotra realised that for all the talk of how FCI needed to become more efficient, over 90 per cent of its expenses were statutorily controlled, either in the form of the price at which it bought grain from farmers to the railway freight, the mandi and other taxes paid to the states.

One major expenditure that offered some room for manoeuvre, however, was the huge interest burden — despite being a government organisation, the State Bank-led consortium was charging FCI 11 per cent interest. What followed was eight months of intense bargaining, and this was reduced to 9.35 per cent in January last year, to 9.04 in April and 8.15 from August.

This was, however, structured such that the effective rate was still around 9 per cent. Since SBI was unwilling to go down further, and thanks to an old agreement, FCI couldn’t go to other banks without the consortium’s permission. So Malhotra got the finance ministry to allow him to raise Rs 5,000 crore of bonds; the first tranche of Rs 1,000 crore at 7.12 per cent, was over-subscribed nine times on the first day itself.

Each 1 per cent interest rate cut results in a Rs 300-crore saving for FCI annually. Rs 10,000 crore of outstandings have been recovered from the food ministry, though Rs 18,000 crore from rural development are still outstanding. All told, FCI has cut costs by around Rs 800 crore this year.

“I’m basically trying to get our chaps to think of themselves as a commercial enterprise, and look at the kind of value addition we can create”, says Malhotra of the MoU he’s signing with NCDEX and the revamp-FCI project that McKinsey & Company is doing for him.

As a first step, though, he’s passing down management books that he’s devouring — Stephen Covey’s Seven Habits of Highly Effective People and Spencer Johnson’s Who moved my cheese have already been marked to senior colleagues.

Like every other bureaucrat, Malhotra plays golf (his handicap is a decent 16), though he doesn’t indulge in the other favourite sport — bridge. “My theory is that you can’t get Punjabis to do things which involve using the brain too much!’

Malhotra’s biggest achievement, apart from getting FCI to reduce its transit and distribution losses from 0.9 per cent to 0.7 per cent, is to try and convince states that they will benefit if they procure what they need to eat from their own states instead of the current system where Punjab and Haryana supply grain to FCI, which is distributed all over the country.

If it does, Uttar Pradesh, for instance, will earn Rs 80 crore a year in mandi taxes, and its farmers will earn Rs 130 crore more since FCI pays farmers around Rs 100 per quintal more than the private traders do — and FCI will save Rs 70 crore of freight charges. Already, FCI has been able to procure 3 million tonnes from non-traditional states, or a tenth of its total.

Not bad for a person who’s spent most of his life in industry and finance, including a stint in Washington at the IMF. ‘My real skill’, says Malhotra, “comes from the field.”

He was awarded Rs 1 lakh in 1983, where he was a collector in Allahabad, for maintaining communal harmony. After 56 years, both Moharram and Dussehra were falling on the same day, and Allahahad has the tradition of all-night processions on Dussehra.

Malhotra had four months to prepare and there was no tension on the fateful day. Which is why, 19 years later, when he was CEO Noida, and the Additional District Magistrate was shot in riots in Kanpur, he was quickly flown in as Commissioner.

Not surprising then, that when there was a slowdown in movement of grain during the 2003 drought, Cabinet Secretary Kamal Pande picked up the phone and told Malhotra to move to FCI.