Towards Efficient Storage

Developments and challenges in the agricultural warehousing segment

Agricultural warehousing involves the storage of agricultural products such as foodgrains, cereals, oilseeds, sugar, pulses, spices, fruits and vegetables. Storage capacity available with the Food Corporation of India (FCI), a part of the warehousing capacity available with the Central Warehousing Corporation (CWC) and state warehousing corporations (SWCs) and capacity leased from the private sector is used for the storage of foodgrains procured by the central government. A major chunk of the country’s organised warehousing capacity is thus still being managed by the government through public sector undertakings such as FCI, CWC, SWCs, state marketing federations, and state civil supplies corporations. As of June 2020, the agricultural warehousing capacity stood at over 166 million tonnes (mt).

Recent government announcements

Under Union Budget 2020-21, the Ministry of Finance announced that more warehouses that comply with the requirements of the Warehousing Development and Regulation Authority (WDRA) will be developed. The government will provide viability gap funding for the construction of WDRA-compliant warehouses on a public-private partnership (PPP) basis at the block/ taluka level, provided state governments make the required land available. The central government has also announced that electronic negotiable warehouse receipts will be linked to the electronic National Agriculture Market platform soon. Already, a pilot for this is under way in a few states including Andhra Pradesh and Telangana. Besides, the central government has announced that the National Bank for Agriculture and Rural Development (NABARD) will be undertaking the exercise of geotagging all cold storage facilities to help increase efficiency. Mapping of storage facilities will help NABARD direct resources so as to expand capacities where there is a need.

As part of its stimulus package, the government has announced a Rs 1 trillion fund for entrepreneurs to set up facilities to procure, store and market agricultural produce, a move aimed at improving the value realised by farmers. The proposed fund will be used by aggregators, cooperative societies and farm entrepreneurs for strengthening farm gate infrastructure. The fund will facilitate financing of cold chain and storage infrastructure and establishing post-harvest management infrastructure. The government has announced that Operation Greens, a price fixation scheme that aims to ensure that farmers are given the right price for their produce, will be extended from tomatoes, onions and potatoes to all fruits and vegetables. The scheme will include a 50 per cent subsidy on transportation from surplus to deficit markets. It will also include a 50 per cent subsidy on storage, including cold storage. The project will be implemented on a pilot basis for six months and will later be extended further.

Key trends and developments

Focus on private participation

Increasing demand for storage space, need for efficient handling of produce and supporting regulations have encouraged private players to make investments in the warehousing sector. Companies have adopted different models to build a profitable business. Private players are also focusing on providing premium warehousing services by building sophisticated large-scale storage spaces. End-to-end logistics service providers have also started tapping the opportunities created by the government in the agri-warehousing segment.

Focus on scientific storage methods

In order to modernise the storage of wheat and rice, FCI as well as other government agencies are undertaking the construction of steel silos. Storage of grains in these silos offers a host of benefits over conventional storage techniques. The Department of Food and Public Distribution has approved an action plan for creating steel silos with total capacity of 10 mt in a phased manner on a PPP basis. Of the 10 mt of steel silos, around 9 mt are for wheat and 1 mt for rice. While the construction of steel silos for wheat is under way, pilot projects are being undertaken for silos for rice. The department is also planning to build steel silos for pulses.

Online depot system

FCI has implemented the online depot system to automate, facilitate and effectively manage its depot-level operations. This will help in tracking and controlling the procurement, storage and movement of foodgrains within a depot by managing all associated transactions such as the lorry weighbridge, quality control, storage/transit loss, and gunny inventory. Real-time information provides accurate inventory and improves visibility on quantity, location and age of the available stock. The online depot system has also been adopted by CWC.

Key challenges

The government is also exploring the idea of setting up modern warehouses with better infrastructure to reduce storage losses. While modern technology is being introduced in the warehouses owned/operated by private companies, godowns operated by government agencies still have a long way to go.

Although the government has been focusing on enhancing agricultural storage infrastructure, various policy issues and infrastructural bottlenecks continue to plague the agri-warehousing segment. The sector is still highly fragmented, with modern and large consolidated warehousing facilities yet to be set up. Apart from this, issues of lack of uniform regulations in the country, high cost of setting up warehouses and lack of supporting infrastructure, like power and specialised transportation, act as a hindrance to efficient agricultural storage.

Industry expectations and recommendations

Investors believe that attracting private investment in the agri-logistics sector is difficult due to its highly unorganised nature. Moreover, the lack of organisation exists on both the supply and demand sides and organised retail models have been missing from the sector until very recently. The impact of COVID-19 on the warehousing sector has not been too harsh, as the demand for agri-warehouses has not faced the heat yet. However, the transportation segment has been impacted significantly. Morevoer, the pandemic has put a spotlight on the agri-supply chain. The government now needs to focus on ensuring economies of scale in the sector. There exists a lack of large warehouses, which highlights the potential for entry of private players in the agri-warehousing space. Besides, the private sector should also be roped in for operations and maintenance of warehouses. COVID-19 has also created immense opportunities for modern and professionally managed agritech set-ups to meet the challenges posed by the pandemic. The growing need for mapping and geotagging of agricultural warehouses, cold storage facilities and other inventory storages for ensuring greater transparency and efficiency in the sector has opened up prospects for hi-tech start-ups.

On the policy front, although the amendments to the Essential Commodities Act can be seen as a noteworthy move on the part of the government, there is scepticism regarding the effectiveness of the recent booster policy announcements. Industry experts also hold the belief that various government organisations managing foodgrain storage should be integrated into one in order to implement uniform and effective policies. Besides, warehouses should be declared as mandis to solve the issues faced by farmers with regard to storage and logistics. For this, however, it is the state governments that will have to act. Till date, only Andhra Pradesh and Telangana have announced 37 warehouses of CWC as deemed markets. Further, all warehouses set up with central or state subsidies should mandatorily be registered under the WDRA. At present, this is not compulsory unless the warehouses want to issue negotiable warehouse receipts.

Going forward, to ensure minimum wastage, there needs to be greater focus on scientific storage methods for foodgrains. To achieve this, road-linked silos need to be constructed, in addition to the existing rail-linked ones. In fact, silos with containers should also be explored as an option. In this regard, multimodal transportation of containerised cargo will help save costs.

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