The Food Corporation of India (FCI), the public sector grain procurement agency, is to soon float a tender for construction of two million tonnes of silo storage capacity, entailing an investment of Rs 2,000 crore.
To be constructed through a public-private partnership (PPP) model on a build, own, operate and transfer basis, these silos would be spread across major producing and consuming regions. The Planning Commission, in a recent report, had suggested the food ministry identify at least 42 such locations on which silos with 50,000 tonnes of storage capacity would be built. In each location, the capacity was to be divided in four units of 12,500 tonnes each.
With the Food Security Bill's passage expected soon, expansion in storage capacity with more engagement of private players is needed. Especially in the wake of foodgrain stored by FCI in open spaces at some places, especially in the northeastern states, getting spoilt in the monsoon and winter due to moisture in the environment.
According to K V Thomas, Union minister of food, consumer affairs and public distribution, the Centre would need to procure 62-63 million tonnes of foodgrain every year. However, the ministry of agriculture projects the annual procurement of foodgrain at 82 mt till 2040. Therefore, additional storage capacity would be handy.
FCI has devised a separate formula for the northeast, wherein only two silos are proposed to be set up in each geographical location, with a storage capacity of 25,000 tonnes. FCI has reported spoilage of around 100,000 tonnes of foodgrain in the northeast due to the lack of storage capacity.
Private sector entities have evinced interest. According to J S Oberoi, head (infrastructure and projects) of L T Foods, the company would be interested in constructing silos in Punjab, Haryana and Madhya Pradesh, in addition to other locations, if permitted.
Under the PPP agreement, the government would provide land and supporting provisions, while the private entities will construct and maintain the silos. While construction is a one-time investment, the breakeven time is seven to eight years, with full occupancy. Hence, the Planning Commission has proposed a 20-year commitment for investors.
"Even if the space is not occupied fully, the ministry of food would pay the charges," said an FCI official.
Sanjay Kaul, managing director of National Collateral Management Services Ltd (NCMSL), said, "Engagement of private sector players would be needed to build adequate warehousing capacity in the country for the success of the Food Security Bill, provided the FCI relies upon them fully, from procurement to delivery."
NCMSL and National Bulk Handing Corporation, another company engaged in the warehousing business, claim to make procurement and handling of foodgrains cheaper than FCI. Recently, Thomas said the ministry was considering engaging private companies in procurement.
