AGRI-WAREHOUSING IN INDIA AND GOVERNMENT SCHEME

Agri-warehousing in India –PPP Model

Production a result of more than five consecutive bumper harvests, the government kept dithering and prevaricating about allowing grain exports. The delay will hit exports, especially of wheat. Indian wheat is overpriced by $50 a tonne, thanks to Russia’s entry into the export market. As a result, government warehouses will remain chock-a-block. Overflowing grain bins will force the government to store a large quantity in open, exposing more rice and wheat to rot and decay in the country with 450 million poor. Also, higher output targets will exacerbate storage concerns.

Ministry aimed to produce a record 245 million tonnes of grains in the crop year that began in July. An output of 245 million tonnes in 2011-12 will be a rise of four per cent from the previous year’s all-time high harvests of 235.9 million tonnes, adding to already higher stocks. On June 1, stocks at government warehouses surged to a record 65.6 million tonnes – 27.6 million tonnes of rice and 37.8 million tonnes of wheat – surpassing the record of 64.8 million tonnes in 2002. Stocks continue to remain high. On July 1, 2011, wheat stocks were 37.1 million tonnes, substantially higher than a target of 17.1 million tonnes, while the rice inventory was at 26.8 million tonnes against a July target of 9.8 million tonnes.

The country’s farmers produced a record 241.56 million tonnes of grains in the 2010-11 crop year, with wheat harvest at an all-time high of 85.93 million tonnes and rice production estimated at 95.32 million tonnes. Pulses production also bounced back, notching 18.09 million tonnes against 17.29 million tonnes in the previous year. Central, state governments and private firms should come together to build new warehouses.

Recognising the need to step up efforts to improve warehousing facilities and to add new godowns, the government set up the Warehouse Development and Regulatory Authority last year. The regulatory body is supposed to spur the process of building modern, scientific warehouses, look into warehousing accreditation, popularize warehouse receipts as negotiable instruments and take up the quality certification of goods. The government has also firmed up plans to create a special purpose vehicle to monitor grain storage and handling. Besides, it will focus on transportation and cold chain infrastructure.

Three public sector agencies are involved in building large-scale storage and warehousing capacities in the country. These are the Food corporation of India , Central warehouse Corporation and 17 State Warehousing Corporations (SWCs). While the FCI uses its warehouses mainly for storing food grains, the storage capacities with CWC and SWCs are used for the storage of food grains as well as other items.

Uses of Warehouses:

Scientific storage of produce from the vagaries of weather, rodents, insects and pests. They prevent quality and quantity losses.

Meeting the financial needs of people who store the produce by providing value for the goods stored.

Regulating price levels by regulating the supply of goods in the markets. More goods from the buffer are released when supplies are less and less is released when supplies are more in the markets.

Offering market intelligence in the form of price, supply and demand information so that market users may develop selling and buying strategies.

The FCI has the largest agricultural warehousing systems with over 24.33 million tonnes of storage capacity in over 1451 godowns located all over India. This includes owned as well as hired warehouses.

The CWC was founded in 1957 to provide logistics support to the agricultural sector. Currently, it operates around 514 warehouses across the country with a storage capacity of 10.27 million tonnes. Other than storage and handling, CWC also offers services such as disinfestations, pest control, fumigation, clearing and forwarding, handling and transportation, procurement and distribution.

State Warehousing Corporations exist in 17 States to provide storage facilities and pest control services for various agricultural commodities belonging to farmers of that State. These warehouses work under different Warehousing Acts enacted by the respective State Governments. The Combined capacity of 63.4 million tonnes,while current stocks are at around 65.6 million tonnes.

Cold storages

Availability of proper cold storages are important for preserving perishable commodities like milk, meat, eggs, vegetables, fruits, ornamental flowers and other floricultural goods. These cold storages give perishable food items a longer shelf life by preventing them from rotting due to humidity, high temperature and micro-organisms. This results in a decrease in loss due to spoilage.

Different products are stored at different temperatures. Flowers will remain fresh even in a moderately cool chiller whereas a product like meat needs to be deep frozen to prevent it from turning rancid. The government trains managers and operators of cold storages to store products at the optimum temperature, maintain machinery, hygiene and administration.

The Food Corporation of India (FCI), the Central Warehousing Corporation (CWC) and the state warehousing corporations have a combined capacity of 63.4 million tonnes, while current stocks are at around 65.6 million tonnes. Of the 63.4 million tonnes of available storage space, the FCI and the CWC have only 37.4 million tonnes of capacity, which includes hired space from private firms. The rest is with state warehousing corporations, jointly owned by the CWC and state governments. The government is trying to give incentives to private companies to create an additional 13.5 million tonnes of storage, in addition to 2 million tonnes through silos. The food ministry has assured private warehousing firms rent for 9-10 years but the progress has been rather slow.

The government aims to boost warehousing capacity by 6.5 million tonnes in the current financial year, with 1.5 million tonnes additional space from the CWC and state warehousing corporations. Besides, the CWC has decided to add 200,000 tonnes of capacity annually for the next 10 years. According to an estimate, the whole project will cost Rs 70 billion.

“We not only need to build large, efficient warehouses, we also need to remove the regional imbalance. We do have reasonably okay warehousing facilities in some of the leading grain producing states. The actual dearth of godowns is in consuming states. There is a need to focus there,” a senior food ministry official, who did not wish to be identified, said.

Unsurprisingly, there has been almost negligible capacity addition by the government in the past 10 years. On the other hand, private companies have substantially ramped up capacities to 54.6 million tonnes, up from 16.2 million tonnes 10 years ago. However, almost 75 per cent of warehouses are small, with capacity of less than 1,000 tonnes. As a result, between 20 per cent and 30 per cent of the harvest rots.

Under the seven-year guarantee scheme of the government, about 127 lakh tonnes of additional storage capacity is to be created in various parts of the country, in addition to 50 lakh tonnes in DCP States. Parts of these new facilities will be created in the form of silos and temperature-controlled warehouses. of many failed attempts, including the coining of a national warehousing policy enrolling the private sector in state-of the-art storage with uniform standards countrywide, to resolve the crucial problem that has repeatedly meant that the country wastes huge quantities of grain each year to rotting.

More important, the government has been unable to maintain an additional strategic buffer for key commodities to allow timely and effective intervention by the government in the domestic market to regulate retail prices for commodities such as wheat, rice, pulses and sugar for the last three years.

The policy of relying on private firms to build warehouses and rent out the space to the government is not an efficient way of ensuring adequate storage space. India will have rely of modern and scientific multi-commodity warehouses, with features like automatic temperature control, they say. Poor transport facilities accentuate the need for better warehouses.

Desired warehouse objective:

1. Providing state of art international standard warehouses.

2. Needed Electronic weighbridges at each location.

3. All weather road connectivity to NH / SH & Rail connectivity.

4. Totally secured warehouse with boundary wall & gates. Assured protection from insects/pests/rodents.

5. Plinth level is as per scientific standard to avoid any seepage from the ground & expected losses.

6. Ridge ventilators are as per food safety standards & post harvest handling norms helps in quality retention of the produce.

7. Partitions available in each warehouse.

8. Warehouses are well equipped with fire fighting equipments.

9. Road available on all four sides of the warehouse for easy movement of trucks.

10. Loading & Unloading docks are available with canopy on top.

11. Lighting arrangements with power back up facility in each location.

12. Round the clock security.

13. Each warehouse is managed by competent & technically trained professionals.

14. Availability of modern & updated sorting, grading & cleaning machine for different grade wise segregation of Agri-commodity as per standards.

15. Availability of electronic weighbridges at each location.

16. Facility of quality control lab for quality checks of agri-produce.

17. In-house skills have been developed for modern post harvest management & handling operations of agri-commodities.

18. Maintaining entire data base for rake movement, carry forward stocks, sowing & production status of important food crops.

19. Having tie-up with both the government & the private agencies for their storage requirements.

20. Warehouse receipt based pledge finance facility to the farmers/customers.