The foodgrain storage problems are likely to get partly resolved in the next 18 months with the public sector procurement agency, the Food Corporation of India (FCI), clearing approvals for building fresh capacity for storing another eight million tonnes (mt) of foodgrain under the 10-year guarantee scheme.
“Tenders for eight mt of storage capacity have been cleared by us. This facility would come for use in the next 18 months,” said a senior FCI official.
While FCI currently owns 13 mt of storage capacity, over 15 mt of warehousing space has been hired from the government and private agencies. Under cover and plinth, the company has owned capacity of 2.62 mt while it hired another 0.54 mt of storage facility from various private players.
Apparently, the Central Warehousing Corporation (CWC) and various States Warehousing Corporations (STCs) own 10 mt of warehousing capacity each. Accumulative all, FCI currently has access to 51 mt of storage facility which is insufficient to meet the requirement of 63 mt as cited in the Food Security Bill.
In the Union Budget 2012-13, the minister proposed an allocation of Rs 5,000 crore on creation of new storage facility as against Rs 2,000 crore allocated during the last year’s Budget. During the past year, the government has cleared two mt of additional storage facility which is set to be completed soon. Storage facility of another five mt is set to get government clearance soon.
But, the allocation of another Rs 5,000 crore in this year’s Budget will provide a significant boost to the warehousing sector in India, said Sanjay Kaul, managing director of National Collateral Management Services Ltd (NCMSL).
The Finance Minister Pranab Mukherjee allocated Rs 5,000 crore to the National Bank for Agriculture and Rural Development (Nabard) for distributing through loan and subsidy to the investor in warehouses. Currently, the government provides a subsidy of 15 per cent of capital expenditure of on warehouses built by private investors. The government also proposes to avail loans through concessional rate of interest to them.
Creating warehouses near producing and consuming centre would reduce the post-harvest grain loss significantly provided the government addresses key issues like logistics cost and provides infrastructure status to warehouses, said S Mittal, chairman and managing director of Arshiya International Ltd. Since logistics cost consists around 14 per cent of the gross domestic products (GDP) of our country, the public private partnership (PPP) model should be encouraged to achieve desired success, he added.
“Substantial increase in outlay for warehousing under rural infrastructure development fund (RIDF) is indeed a timely measure when the country is facing huge deficits in storage space. With rise in foodgrain production and the intended Food Security Act, this measure would help in higher credit flow for warehouse construction at affordable rates for intending investors. The government’s endeavour should therefore be to reduce the interest cost further for such a critical requirement. This could be done if the funds from RIDF are directly disbursed by Nabard to recipients to avoid intermediation cost of commercial banks,” said Anil Choudhary, managing director of the National Bulk Handling Corporation.