To augment storage facilities for food grain storage, the central government plans to tweak its existing seven-year guarantee scheme. The move will encourage more private participation in storage and warehousing.
In a meeting of Food Corporation of India (FCI)?s Board of directors last week, proposals to change some provisions of the scheme, which ensures assured hiring of godowns built by private parties for seven years by FCI, were discussed.
Under the scheme, the government plans to construct 127 lakh tonnes of additional storage capacity in various parts of the country along with 50 lakh tonnes capacity in decentralised procurement states.
Till June 15, FCI data shows it had storage capacity of 305.17 lakh tonnes, of which 32.45 lakh tonnes were under covered area plinth (where grains are stored in plastic covered in an elevated ground) and 272.72 lakh tonnes had fully covered storage capacity.
Sources said the corporation is considering relaxing the norms for land titles held by private players interested in building godowns. Presently, parties which don?t have their own land are not eligible to participate.
According to new norms, private players can participate in the scheme on the basis of bank guarantees, and if their bid is accepted they can give proper land documents within 90 days.
?Our interaction with private companies shows that most of them were reluctant to participate in the seven-year guarantee programme as they feared that if their bids are not accepted, the whole exercise of acquiring land for building godowns will go waste. Hence, there is plan to alter this provision,? a senior government official said.
The corporation is also considering allowing construction of godowns according to central warehousing corporation design norms, not FCI, which will ensure that land requirement for a godown is less, thereby leading to decreased cost of production. The corporation is considering proposals wherein, it will immediately take a godown on rent as soon as construction finishes , rather than waiting for the contract period to get over.
?The rent for hiring such godowns constructed by private players is also up for revision to make it more close to the prevailing market rates,? sources said, adding that FCI is willing to pay more rental in areas with high land prices. A move is also afoot to change service tax rules and some other provisions to make the scheme much more attractive to private participants.
?There is a definite business logic in storage as we need almost 30-40 million tonnes of warehousing capacity, but my personal belief is plane-jane warehousing is not attractive for private players. What is needed is complete integrated business model of warehousing, transportation and other linkages,? said Rajesh Srivastava, chairman and managing directors, Rabo Equity Advisors.