The new government should give priority to modernise foodgrain storage, and it could include fiscal incentives since the country stands to gain overall in terms of saving costs and reducing wastage.
One of the problems that India suffers in agriculture is post-harvest losses. In India, post-harvest losses in foodgrains is estimated at 20 per cent annually.
The losses occur due to rodents eating the grains, pilferage, wastage during transportation and weather-related problems, especially rains that cause damage to stored grains.
The problem in India, particularly with Food Corporation of India (FCI), is that foodgrains are still stored using the age-old traditional godowns and covered and plinth (CAP) storage. Such storage leads to leakage of foodgrains.
According to the Ministry of Food and Public Distribution, state agencies like FCI, Central and State Warehousing Corporations have a capacity to store 85.15 million tonnes (mt) foodgrains. Of this, covered godowns make up 72.45 mt and CAP storage the rest.
There is an additional problem in such storages. Such storage doesn’t guarantee the “first-in first-out” of foodgrains. This means, grains that had come to the godowns do not necessarily go out first. This leads to old stocks piling at the bottom and getting spoilt.
Though FCI has taken steps to overcome this problem, this is no guarantee that there is 100 per cent compliance to ensure foodgrains that come into a godown first leaves first. Thus, all these problems had led to the government deciding to modernise its storage system.
A pilot project was initiated during the National Democratic Alliance (NDA) regime led by Atal Bihari Vajpayee to set up steel silos to store 5.5 lakh tonnes of wheat in select parts of the country — Punjab, Haryana, Karnataka, Maharashtra and West Bengal. The silos were to be set up by private agencies, which also got permission to directly procure from farmers in the case of the silo that was set up in Punjab.
The United Progressive Alliance (UPA) government ran the pilot project but failed to act beyond that. After the NDA returned to power in 2014, the Centre decided to go ahead with foodgrain storage modernisation and included a project to set up silos for rice too.
The NDA government decided to have the silos set up on build, own, operate (BOO) and build, own, transfer (BOT) basis under private-public partnership programme.
Under BOT, state governments were to provide land and the private sector would bring in the technical expertise. Under BOO, the private sector was to set up everything from the scratch.
The Department of Economic Affairs, on its part, came up with two types of viability gap funding (VGF) for the BOO projects. One type of VGF was to provide technical aide like equipment and computers, while the other type was for buying land.
The silos not just help improve storage but also save costs. They can save loading and unloading labour costs incurred at mandis, warehouses and user end. They can even save mandi tax that are over 10 per cent in states like Haryana and Punjab.
In the 2014 rabi marketing season that began on 1 April, the government saved nearly 25 per cent of its procurement costs when it bought 400,000 tonnes of wheat in bulk for storage in silos.
The current government came up with a revised action plan in January 2016 and decided to increase the capacity of storage in silos by another 10 mt. The plan to select the silos operator and set them up was to be executed in three phases until 2020.
In the first phase that began in 2016-17, operators that can store 3.625 mt in silos were to be selected while 500,000 tonnes additional storage capacity was to be completed. In the 2017-18 fiscal, operators to set up silos to store 2.9 mt were to be selected, while silos having capacity to store 1.5 mt were to be completed.
In 2018-19, operators who would set up silos to store 3.475 mt would be selected, while silos that will have an additional capacity to store 3 mt would be completed. During the current fiscal, the remaining silos that have a capacity to store another 5 mt would be completed.
A status paper of FCI says that in the first phase operators to set up silos to store 3.625 mt were selected against a target of 3.75 mt. At the same time, capacity of silos was increased by 450,000 tonnes against a target of 500,000 tonnes.
The progress of the second and third phases have been tardy. In the second phase, operators that can store only 500,000 tonnes in silos have been identified against the target of 2.9 mt, while the third phase is at a standstill.
In terms of completing additional storage in silos, only 175,000 tonne storage capacity has been completed out the targeted 1.5 mt.
This means, as of now, operators who can store nearly 4.2 mt only have been identified, while meeting the target to add capacity to silos storage could prolong. FCI said in its status paper that operators to build silos to store 2.875 mt would be completed by March this year but not much has been heard on the subject.
On the other hand, Punjab has exceeded its target for construction of silos and it is likely to add 1.55 mt additional capacity. Other states, however, are lagging in adding silo storage capacity.
Compared to developed countries, where silos or elevators as they are called there help farmers to sell their produce easily with some of then set up near growing areas, India has a long way to go. The new government should accord priority to modernise foodgrain storage, and it could include fiscal incentives since the country stands to gain overall in terms of saving costs and wastage.