The Food Corporation of India (FCI) is likely to award contracts for the construction of wheat silos with capacity of 7 million tonne (mt) under the private public partnership (PPP) model by the end of this month, according to official sources. These silos are expected to be built over the next three-four years, with investments to the tune of over Rs 3,000 crore.
Silos are sub-mandi yards, which could bring ease of procurement of grains for farmers and lead to significant reduction in logistical costs.
Of 3.4 mt of silos with railway sidings awarded to private entities, around 1.8-mt capacity has been created and the balance is at various stages of construction.
Private entities including Adani Agri Logistics and KCC Infrastructure have been awarded the contracts.
In addition, under a new ‘hub and spoke’ model approved by the food ministry in 2020, 3.5-mt silo projects are being awarded to private entities, with an estimated investment of Rs 2,800 crore.
This is part of a broader Rs 9,400-crore project to build wheat silos with 11 mt of capacity during the next three-four years under the PPP mode. These silos will be spread over 249 locations across Punjab, Haryana, Madhya Pradesh, Uttar Pradesh, Rajasthan, Gujarat, Maharashtra, Bihar, West Bengal, Jammu, Uttarakhand and Kerala.
Silos will be used for storing wheat for the FCI.
Currently, the silos are being built under the design, build, fund, own and transfer (DBFOT) mode, under which the land is owned by the FCI and via the design, build, fund, own and operate (DBFOO) model, under which land belongs to private entities.
The FCI will use these for storage of wheat through a lease of 30 years with private entities. Fixed storage charges to be paid by the FCI to private entities, based on a per-tonne, per-year basis, are the bidding parameters. This fixed charge escalates by 70% of the wholesale price index and 30% of the consumer price index.
In 2005, under a pilot project to modernise storage infrastructure, construction of 0.5 mt of storage capacity under the build, own and operate (BOO) model was carried out by Adani Agri Logistics. Subsequently, on recommendation of a high-level committee chaired by former food minister Shanta Kumar in 2015, construction of silos with railway sidings commenced.
Then the food ministry approved a ‘hub and spoke’ model because of challenges faced in land acquisition for railway sidings.
Food ministry officials say that if food grains are stored in silos and transported in bulk, losses due to theft, pilferage and transportation would be negligible compared to the food grains stored in warehouses.
As part of a pilot initiative, two rice silos with a combined storage capacity of 25,000 tonne are currently being built at Buxar and Kaimur in Bihar, by private entities.
The FCI stores on an average 50-60 mt of rice and wheat at any given point of time. However, because of the free ration scheme being implemented and lower wheat procurement, the FCI’s stocks have declined in the last six months. Silos ensure better preservation of food grains.