Foodgrains - Stemming the Rot
Posted on: 03:26 PM IST Dec 11, 2010
For a few years now, Indias self sufficiency in food grains has been accompanied by reportsof wastage due to poor storage. All this could be a thing of the past if the Warehouse Development & Regulation
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),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.Indias 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 HandlingCorporation (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 thanwhat 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 multipleauthorities the Agricultural Produce Market Committee (APMC), the local corporation, the co-operative societyand 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 rolesunder 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 rangesbetween 2.5 lakh tonnes and 5 lakh tonnes. This wastage is on the procurement of roughly 40 million tonnesevery year. Most of this is stored in the warehouses of FCI, CWC and State Warehouse Corporation. Private warehousesonly have about 2 million tonnes of capacity, and generate about Rs. 15,000 crore of warehouse receipts. Sanjay Kaul, managingdirector and CEO of NCMSL says, WDRA will allow this warehousing receipt business to swell to over Rs. 80,000 crore within thenext 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 milliontonnes 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.