Hello Madhura
A Forwarding Equivalence Class (FEC) is a term used to describe a set of packets with similar characteristics as far as how they are forwarded is concerned. Packets that are in the same FEC are bound to the same MPLS label.
There are specific characteristics that can be used to determine the FEC of a particular packet, of which the destination IP address is almost always one of them. But there are additional characteristics including DSCP values. Packets in the same FEC use the same Label Switched Path (LSP) which is essentially the specific path that is taken by MPLS labeled packets.
I think this Cisco documentation describes it more clearly like so:
Generally speaking, an FEC is a set of packets that receives the same forwarding treatment by a single LSR. For simple MPLS unicast IP forwarding, each IPv4 prefix is an FEC. For MPLS VPNs, each prefix in each VRF is an FEC—making the prefix 10.3.3.0/24 in VRF-A a different FEC from the 10.3.3.0/24 prefix in VRF-B. Alternately, with QoS implemented, one FEC might be the set of packets in VRF-A, destined to 10.3.3.0/24, with DSCP EF in the packet, and another FEC might be packets in the same VPN, to the same subnet, but with a different DSCP value.
For each FEC, each LSR needs a label, or label stack, to use when forwarding packets in that FEC. By using a unique label or set of labels for each FEC, a router has the ability to assign different forwarding details (outgoing interface and next-hop router.)
I hope this has been helpful!
Laz