Government approves additional storage capacities

Under pressure over lack of foodgrain storage capacities, the government has approved the construction of storage godowns for a capacity of 14.9 million tonnes (mt), up from an earlier capacity of 12.76 mt, with major addition in Andhra Pradesh, Maharashtra, Uttar Pradesh and Punjab.

The government has also decided to transfer a storage capacity of around 2.5 mt in Rajasthan and Gujarat, where land is available. Earlier, the Food Corporation of India (FCI), the government’s foodgrain procurement and distribution agency, had floated tenders for construction of godowns with capacity of 7.1 mt and 4.1 mt in Punjab and Haryana, respectively. However, the tenders received lukewarm response due to high real estate prices and stringent government norms.

“Recently additional capacities have been approved and we have decided to shift 2-2.5 mt capacity from Punjab to other states. This has been done keeping in mind the existing capacity gap in different states and by repeated investor meets. We have sanctioned the capacities and the ground work is on in some states,” said a ministry official requesting anonymity.
 

Approved food grain storage capacities in different states
State	Earlier	Now
Andhra Pradesh	0.36	5.5
Karnataka	2.05	6.5
Maharastra	1	8
Punjab	71.25	100
Uttar Pradesh	NA	26.81
Overall 15 states	127.65	149
Figures in lakh tonnes                   Source: FCI

A high-level committee of FCI has recently approved an additional 2.13 mt of storage capacity which will be constructed through a 10-year guarantee scheme for construction of godowns through private entrepreneurs (2008). Earlier, the committee had approved storage capacity of 12.76 mt under a seven-year guarantee scheme.

Under the new guidelines, the land required to set up a warehouse has also been relaxed from three acres to two acres for the first 5,000 tonnes, while for an additional 5,000 tonnes it has been revised from two acres to 1.7 acres. Therefore, FCI is expecting better response from private players.

Under the guarantee scheme, the godown is to be taken on hire from private parties generally through Central and State Warehousing Corporation which FCI will hire for 10 years.

The government also plans to focus on enhancing the storage infrastructure of states that have adopted the Decentralised Procurement Scheme (DCP). The concept of DCP was mooted with a view to increase the participation of states in procurement as well as the public distribution system (PDS).

Under DCP, states take the responsibility of procurement of food grains under minimum support price (MSP), ensure its scientific storage and distribution of these grains through PDS. However in actual practice, FCI supplements the DCP operations in states by extending its own resources, when needed.

In theory as well as in practice, DCP is considered more efficient than the centralised procurement scheme because it ensures the self-sufficiency of a state and saves significant freight costs. Currently, DCP is followed by seven states for wheat and 11 states for rice. Uttar Pradesh and Maharashtra are two prominent states which follows decentralised procurement.

“It makes sense to focus and try to enhance the storage capacities in states observing decentralised procurement. So, we are looking at focusing on states like Uttar Pradesh, Gujarat and Maharashtra, Tamil Nadu and others and shift focus from only Punjab and Haryana,” said an official of the food and public distribution ministry on condition of anonymity.