India’s agricultural sector has been growing fast, however, it is burdened by the lack of sophisticated storage systems for agricultural products. There is a massive gap of more than 50 per cent in the warehousing capacity against the total food production of 311 mt. This has fuelled the demand for agricultural warehousing and construction of modern silos in the sector. To address this need, the government is taking active measures to augment this capacity through construction of warehouses, godowns and silos. Currently, over half of the warehousing capacity is owned, hired and managed by public sector undertakings such as the Food Corporation of India (FCI), Central Warehousing Corporation (CWC), state warehousing corporations (SWCs) and other state agencies. As of November 1, 2023, all state agencies (including SWCs) have a storage capacity of 37.67 million mt, FCI has a capacity of 36.89 million mt, while CWC has a capacity of 10.99 mt. However, the sector has been shifting towards the public-private partnership (PPP) mode to improve the quality of silos. Further, the outlay under the Agriculture Infrastructure Fund (AIF), Warehouse Infrastructure Fund (WIF) and Food Processing Fund is also being made by the government to develop efficient agri-logistics systems.
Government schemes and initiatives
The government is introducing and promoting several programmes to create better warehousing opportunities in the country. The central government devised a scheme called the Central Sector Scheme – Pradhan Mantri Krishi SAMPADA (Scheme for Agro-Marine Processing and Development of Agro-Processing clusters) Yojana to set up mega food parks (MFPs), integrated cold chains and agro-processing clusters, while creating backward and forward linkages. It was planned for a four-year period from 2016 to 2020, and recently extended to 2026 with a fund allocation of Rs 46 billion. Under the scheme, 24 MFPs are operational and 41 have been approved for financial assistance, with one each in the north-eastern states, as of March 2023. Furthermore, the Private Entrepreneurs Guarantee [PEG] Scheme and the Central Sector Scheme support FCI in creating or hiring storage units through storage gap assessments. Under PEG, FCI gives guaranteed hiring of 10 years to private investors and 9 years to CWC, SWCs and state agencies. Private investors or CWC/SWCs are responsible for the warehouse construction. Once taken over by FCI, storage charges are paid to the private investor or CWC/SWC for the guaranteed period of 9 to 10 years, irrespective of the quantum of foodgrains stored.
The budgetary allocations under various funds are also pushing the development of warehousing infrastructure. For instance, a medium-long-term debt financing facility is expected to be provided under AIF till 2025-26. Under this, a campaign named Banks Heralding Accelerated Rural and Agriculture Transformation (BHARAT) was launched from July to August 2023 to mobilise loans for agricultural infrastructure projects. As of August 2023, 33,369 projects have been sanctioned with a loan amount of Rs 260.64 billion. Similarly, a loan amount of Rs 71.59 billion has been sanctioned under the WIF till March 2023, while a term loan of Rs 11.72 billion has been sanctioned under the Food Processing Fund till September 30, 2023.
Emerging developments
Construction of modern steel silos
The setting up of silos has started gaining momentum in India as it allows the storage of foodgrains (especially wheat) in optimised space at decentralised locations. As of October 2023, the completed/operational silos’ storage capacity of FCI and state agencies stands at 1.97 mt, of which around 70 per cent has been developed by FCI under PPP with the involvement of private players such as Adani Agri Logistics, National Commodity Management Services Limited (NCML) and KCC Infrastructure. The construction of steel silos was first emphasised under the National Policy on Handling, Storage and Transportation of Foodgrains in 2000, followed by the uptake of a pilot project by FCI to develop steel silos in 2005 and the implementation of the Action Plan 2015, for the construction of steel silos of 10 mt capacity with railway sidings in PPP mode. There has been slow movement under the action plan with a capacity of 1.42 mt completed and 0.95 mt under implementation as of August 2023. However, due to challenges regarding land acquisition for creating railway sidings, the government came up with the “hub and spoke” model for creating roadside silos with containerised movement in 2020. Under this, FCI will develop a total capacity of 11.11 mt in 249 locations across 12 states in three phases at an investment of Rs 92.36 billion by 2026. As of August 2023, projects with a capacity of 4.44 mt are under implementation across 10 states and are likely to be completed by 2024-25. Uttar Pradesh has the highest capacity under development, followed by Punjab and Bihar.
In another recent development, the government is now expanding the construction of silos to store rice. It is set to commission India’s first two rice silos in Bihar soon, with a total capacity of 0.25 mt being built by NCML. Further, the constitution of an inter-ministerial committee was approved in May 2023 to facilitate the world’s largest grain storage plan in the cooperative sector, with the convergence of various schemes. This plan aims to increase the storage capacity by 70 mt with storage infrastructure at select primary agricultural credit societies and an expected fund allocation of Rs 1,000 billion.
Adoption of smart and digital systems
New technologies and digital platforms are being developed in India to achieve efficient and scientific warehousing. One such platform is the Warehouse Management System, a cloud-based application that automates various warehousing operations to ensure greater transparency and efficiency. It has been rolled out at 394 CWC warehouses across India. It generates real-time reports and also allows e-payments for various operations. Similarly, the Department of Food and Public Distribution (DFPD) of the Ministry of Consumer Affairs has selected eight locations for setting up smart warehouses that would be equipped with sensors to control temperature, humidity, rodent motion, fire, smoke, phosphine gas, oxygen, etc.
Active involvement of agri-tech start-ups
Agri-tech start-ups are professionally managed companies providing information and techniques to farmers through the usage of technology. Currently, more than 1,000 agri-tech start-ups in India assist farmers in improving farming techniques along with providing grain storage options. For instance, Ergos is a company that helps farmers store foodgrains in their “grain bank” by facilitating loans and supply chain management through networks with non-banking financial companies and banks. In September 2023, it raised $10 million to digitalise grain storage, link farmers to markets and provide affordable credit. Similarly, agri-tech start-up Balwaan raised $2 million in a fundraising round led by Caspian Leap for the Agriculture Fund in May 2023. It will use the funds to develop new farming products and establish a pan-India distribution network for its existing products focused on the southern and eastern regions of the country.
Upcoming opportunities and pertinent challenges
According to India Infrastructure Research, the agricultural warehousing capacity is expected to grow from 145 mt as of June 2023 to 223 mt by 2026-27. Further, based on NITI Aayog’s food demand forecasts, it is estimated that the storage demand will require an area of 436.24 million square feet by 2024-25. The government also targets to increase the commissioned silos’ storage capacity from about 2 mt at present to 20 mt by 2026. Meanwhile, as India advances towards the development of modern warehouses and silos, it is faced with critical challenges of high construction costs and land acquisition. The construction of a modern warehouse is capital intensive and has a high estimated cost of around Rs 6,000 per mt of capacity according to DFPD. The expenditure on land cost is further aggravated by the tedious and time-consuming process of land use conversion. All these challenges would need to be mitigated to accelerate the growth of the sector.
