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Foodgrains - Stemming the Rot

, Forbes India
Jan 12, 2011 at 06:21pm IST

For a few years now, India’s self sufficiency in food grains has been accompanied by reports

of wastage due to poor storage. All this could be a thing of the past if the Warehouse Development & Regulation

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Act (WDRA) 2007 is implemented well. The WDRA will allow private investment in good storage facilities.

Currently, much of the storage of grains is done by the Food Corporation of India (FCI),

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Foodgrains - Stemming the Rot

Increased private sector involvement in warehousing could halve the amount of grains that gets wasted.

the Central Warehousing Corporation (CWC) and other state storage agencies. The subsidiaries of the

two biggest commodity exchanges in India have also been active in this sector with limited storage facilities.

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India’s largest agricultural commodity exchange, National Commodities and Derivatives Exchange (NCDEX),

has a warehousing subsidiary known as National Collateral Management Services (NCMSL). Close on its heels is National Bulk Handling

Corporation (NBHC), a subsidiary of Multi Commodity Exchange (MCX), the other major player in warehousing agri products.

WDRA is important because the current storage facilities in the country are far fewer than

what they ought to be. Building storage facilities close to cropping areas requires more private investment.

This requires the warehousing business to be made more attractive.

A big disincentive so far has been the requirement for warehouses to be ‘cleared’ by multiple

authorities — the Agricultural Produce Market Committee (APMC), the local corporation, the co-operative society

and other such bodies. Once WDRA is implemented, all agricultural warehouses will have to meet the norms laid down

by the WDRA. “We believe that there will soon be a convergence of all these roles

under the WDRA,” says Anil Choudhary, managing director and CEO, NBHC.

So what sort of impact can WDRA have on losses due to rotting of grain?

The losses could be halved. The official figure on the amount of grain that rots every year ranges

between 2.5 lakh tonnes and 5 lakh tonnes. This wastage is on the procurement of roughly 40 million tonnes

every year. Most of this is stored in the warehouses of FCI, CWC and State Warehouse Corporation. Private warehouses

only have about 2 million tonnes of capacity, and generate about Rs. 15,000 crore of warehouse receipts. Sanjay Kaul, managing

director and CEO of NCMSL says, “WDRA will allow this warehousing receipt business to swell to over Rs. 80,000 crore within the

next couple of years.” In fact, it has the potential to go up to Rs. 200,000 crore in five years. These numbers say that the two million

tonnes storage in private hands could swell to 15-20 million tonnes in five years time. And with private warehouse wastage being almost nothing,

a 20-million tonne shift to private sector could halve the amount of rotting grain in five years time.

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