Scope: Increasing the capacity of Food Grain Warehousing in India through public private partnership model Strategic Importance

The warehousing capacity available in India, in public, cooperative and private sector is about 108.75 million MTs. The storage space available in the country is not sufficient to cater to the procured stocks. As a result, a substantial quantity of food grains is stored in Cover and Plinth (CAP) Storage. about 20% of the food grains are destroyed annually because of poor storage facilities. An estimated cumulative loss of ` 550 million is expected, owing to the lack of proper cold storage facilities for agricultural produce. Therefore, availability and augmentation of storage capacity is one of the main priorities of the Government of India. As per the estimates, additional 35 million MTs warehousing capacity is required in next 5 to 10 years. There is a need that sufficient modern warehousing capacity should be created in the country to store and preserve the food grains procured for Central Pool Govt. Policies The Government enacted the Warehousing (Development and Regulation) Act 2007 to ensure that farmers are able to keep their produce in the registered warehouses and use warehouse receipts (WR) as a negotiable instrument. These negotiable warehouse receipts (NWRs) have the backing of the Warehousing (Development & Regulation) Act, with a view to protect the interests of those involved in issuing, trading or collateralizing these NWRs

Private Entrepreneurs Godown (PEG), 2008 Scheme. The Government had formulated this scheme for creation of additional storage capacity for foodgrains through private sector participation in 2008. Under the scheme, there is a proposal for creation of 15.29 million MTs storage capacity in 19 States through private sector participation and CWC/SWCs. the guarantee period was increased from five years to seven years and subsequently to 10 years. The ceiling of rate fixed for hiring of godowns has been revised from Rs. 3.80 per quintal per month to Rs. 4.78 per quintal per month

The Gramin Bhandaran Yojana is aimed at the construction/renovation of rural godowns, so as to create scientific storage capacity with allied facilities in rural areas to meet the requirements of farmers for storing farm produce. Under the scheme, subsidy @25% of project cost is provided for construction/renovation of rural godowns to all categories of farmers, agriculture graduates, cooperatives & Central Warehousing Corporation (CWC)/State Warehousing Corporations (SWCs) subject to a maximum ceiling of Rs.46.87 lakh

Rural Infrastructure Development Fund (RIDF) Scheme: Under the scheme, loans would be given for the construction of warehouses, @ 8% with rebate of 1.5% for timely payment of the loan. Viability Gap Funding (VGF) under the existing VGF scheme which allows grants of upto 20% of capital cost on the basis of competitive bidding. The FCI would provide an

additional VGF of upto 20% of capital costs. For storage of wheat in these silos, the developer will be entitled to receive a recurring service charge provided he meets the required performance and maintenance standards

Constraints/Challenges Procurement of land in a strategic location with clear title and proper approvals is still a key challenge for any new entrant to set up a warehouse

Different states have different rules regarding agricultural land acquisition, which create entry barriers and have serious cost and time implications

The lack of warehousing standards and accreditation poses a significant challenge to the industry where quality and flexibility of available warehousing space is a major concern

Access to adequate and timely credit at a reasonable cost is one of the most critical problems faced by this sector.

The delay in the implementation of GST and the existing complex sales and transport tax system tends to discourage the establishment of a national-level centralized distribution centre or hubs, the likes of which are often seen in developed countries.

Lack of integration with complete supply chain: Though warehousing is an integral component of the supply chain, currently warehouses are structured on a standalone basis. Lack of trained manpower: The lack of training institutes adds to the woes of the warehousing sector. Lack of IT penetration: Limited real-time visibility with manual inventory management, documentation, billing and reporting has raised doubts on the sustainability of a large number of warehousing players.

Capital subsidy under the Rural Godown Scheme wherein only 15 per cent of the total project cost wherein the maximum cap of is only Rs 1.35 crore which is a big hurdle towards attracting more investment to create a large infrastructure under Hub and spoke model to cover all rural areas. So, in order to create a hub and spoke model, one should have a minimum capacity of 20 to 25,000 MT, which requires an investment to the tune of Rs 10 to 12 crore per location excluding the land prices

Financing Opportunities Generation of funds through public issues by private enterprise

Foreign Direct Investment (FDI) up to 100%.

Loans from financial institutions, NABARD, external commercial borrowings, etc

Conclusion The Government of India must instruct Banks to keep rate of interest at 6 to 7 per cent per annum and Banks should be allowed to lend below base rates to promote investment in the agri infrastructure sector and accordingly the cost of construction could be reduced with the help of easy finance at concessional rates. it is necessary for the government to focus on this aspect. We believe that government should increase the cap of Rs 1.35 crore to Rs 3 crore per location and 15 to 40 per cent for companies. The government should motivate and promote the PPP mode in agri infrastructure sector NABARD may also consider providing an interest incentive, which will bring down the cost of funds by at least 4-5 per cent p.a. Thus, we would be able to provide the storage space at concessional rates to the farmers Government may also consider providing Agri-Industry status to warehousing industry and accordingly respective State governments may provide concession in water, electricity, stamp duty, and any other municipal charges or rents.