The problem of plenty

It can?t get more ironical than this. While farmers are harvesting a bumper rabi crop, procurement agencies such as the Food Corporation of India (FCI) are struggling hard to provide storage space for the grain that is flooding the mandis. Even as substantial quantity of foodgrain is being moved out of government storages, there could still be storage and warehousing problem for the new crop. Though the Central Warehousing Corporation has promised to provide 1.18 lakh tonne of additional space to FCI this fiscal, as per estimates, a whopping 15.2 million tonne of foodgrain won?t have storage facility, fear FCI officials. The situation is more acute in Punjab, Haryana and Madhya Pradesh, where a bumper harvest and good remunerative price have ensured that more than 80% of the total wheat arrival is being procured by state and Central agencies.

And, even as the country debates a food security Bill, ensuring a minimum amount of food to the poor, and millions are meanwhile deprived of two square meals a day, tonnes of farm produce goes waste every year because of inadequate storage. Storage and transportation losses for foodgrain, cereals and pulses is officially estimated to be around 1%-4% of the total production, but the larger impact is immense, as wheat, rice and pulses are the main staple food for millions of Indians.

Here is more food for thought: millions of rupees are pumped into increasing food production in the country, but the urgent need to augment storage and warehousing facilities is not considered on the same scale.

Even Prime Minister Manmohan Singh focused on this fact during his recent address at the first meeting of a core committee on rising food prices. The committee, comprising chief ministers of 10 major food producing states, identified inadequate storage, warehousing and cold chain facilities as being primary reasons for galloping food inflation. Siraj Hussain, chairman of Food Corporation of India, was on record, saying, ?There will be a substantial shortfall in storage capacities and procurement this year because state governments have not made any tangible investment in enhancing storage capacities.?

A large chunk of foodgrain procured by the FCI lies in the open under the cover and plinth (CAP) facilities for years together, though under normal circumstances foodgrain should not be stored in CAPs for more than one year. In 2010-2011 too, almost 50 lakh tonne of the total foodgrain procured would have to be stored in the open, mainly in Punjab and Haryana, the two states that contribute more than 80% of foodgrain to the central pool. ?We admit that storage under CAP should not exceed more than six months to one year, but we don?t have an option,? admitted BB Pattanaik, managing director of Central Warehousing Corporation.

It?s not that storage facilities have not been augmented over the years, but they have failed to keep pace with rising food production. For example, though foodgrain procurement from states like Chhattisgarh, Bihar and Orissa has increased substantially over the past few years, there is hardly any storage capacity in these places.

Orissa contributes almost 2.5 million tonne of foodgrain annually to the central pool, but has a storage capacity of hardly 2,00,000 lakh tonne.

The abject lack of private participation has further stymied the growth of storage facilities in the country and the fallout is gigantic.

A report by a task force constituted by the agriculture ministry on development of cold chains in the country had estimated that almost 30%-40% of horticulture produce is wasted annually because of inadequate storage and transportation facilities. Similarly, a study by ICRIER puts the losses at around 15-50%, particularly for perishable commodities.

The ICRIER study had shown that with 1999 as base year, India?s fruit and vegetable production is expected to rise to 66.9 million tonnes and 131 million tonne, respectively, by 2010-2011 and almost double itself by 2015-2016. But the actual supply of fruits and vegetables would be almost 20%-25% less than productions because of huge post-harvest losses.

Private players shy away

So what ails private participation in storage facilities, when experts believe that storage and warehousing is an almost Rs 8,000 crore to Rs 10,000 crore business, given that current facilities meet just 20% of the requirement. ?There is a dearth of big corporates in storage and warehousing facilities in the country, largely because it is a highly capital-intensive business and because of lack of clarity on the exact business models of cold chains and warehouses,? says Rajesh Srivastava, chairman and managing director of Rabo Equity Advisors. Rabo Equity, a subsidiary of Rabobank, has strong interest in the agriculture business. Srivastava says though there is huge potential for private companies in storage and warehousing facilities, their success will depend on companies willing to provide end-to-end logistical solutions like aggregating, storage and distribution. ?Moreover, in most cases we have seen that companies are unwilling to venture into providing storage and warehousing facilities as they are unaware of the risks,? he adds. Also, existing schemes to encourage private participation have not elicited much response from private players.

Pradeep Sabarwal, deputy general manager of Adani Agri-Logistics Ltd (AALL), says a modern storage and warehousing facility with strong facility saves valuable time of farmers, lowers ancillary charges and also helps in getting better price for his produce. Adani?s state-of-the-art grain silos built at Kaithal in Haryana and Moga in Punjab are examples of how private and public sectors could join hands to provide modern storage and warehousing facility to farmers. The two silos that AALL built with FCI in Moga and Kaithal, today not only provide the best facilities to farmers, but also ensures that quality of foodgrain remains intact at any point of time. The silos are also equipped with modern cleaning and drying operations through sieves, magnetic separators and other such technologies to remove dust, tailings and foreign matter. The two silos, built along with its five field depots, can hold up to 5.5 lakh tonne of foodgrain at any given point of time.

Of late, the government has realised the importance of private participation in providing storage and warehousing facilities and has come up with steps like relaxing the external commercial borrowing norms, which should help in attracting more investment in this sector. But what is needed is a strong policy initiative from both the Centre and states to augment storage capacities.

(With inputs from Sandip Das)

FCI?s rescue plan

* Hired additional capacity of 28.54 lakh tonne in past one year

* Hired another 3.3 lakh tonne capacity from Central Warehousing Corporation during March-April, 2010

* In past year, FCI constructed plinths to accommodate 4.23 lakh tonne

* Directions issued to field offices to use existing capacity up to 120%

* Zonal executive directors given powers to hire CAPs from private parties for 3 years, extendable by 2 years

* Govt plans construction of godowns through private entrepreneurs under 7-year guarantee scheme

* Covered wagons to transport

* Central and state warehousing corporations allowed to construct godowns on own land

* Funds provided for godowns in J&K, North-East, Sikkim, Chhattisgarh and Bihar

* Orissa govt to construct 3,00,000-tonne storage capacity in a year