With the increasing foodgrains production, the warehousing has become a big challenge in India. Now, scientific processes and technology innovations have shown a new direction in foodgrains storage and supply chain. It is reducing the post-harvest losses and providing better options to the farmers. Mohd Mustaquim highlights the changing dynamics of the warehousing sector
The Indian farmers are producing surplus foodgrains every year and that has made the country not only self-sufficient in food production but also leading exporter of many commodities. As the production has been growing, the storage and warehousing have been a major concern. The existing approach of warehousing has led the country to lose foodgrains worth thousands of crores every year.
“Precisely, India loses about Rs 80,000 crores of agriculture produce every year during the post-harvest period. Being an agriculture-centric nation and one of the largest producers, it becomes crucial that not even a morsel is wasted and all efforts should be made to prevent this,” says Sandeep Sabharwal, Founder and CEO, Sohan Lal Commodity Management.
In India, agriculture sector as a whole and its supply chain process are very fragmented. Thus, the sector demands deep focus on warehouse management as a part of post-harvest solutions.
Echoing similar views, Sunoor Kaul, Director, Origo Commodities, says, “At the farmers’ level there were no storage facilities and it affects the cost of production vis-a-vis selling price of the produce. There are gaps in warehouse management. The gap is still of about 30-35 million tonnes of storage.”
Under the chairmanship of Shanta Kumar, the Government of India had set up a High Level Committee for re-structuring the state operated Food Corporation of India (FCI). The committee recommended in February 2015 that FCI should hand over all procurement operations of wheat and paddy to the states that have gained sufficient experience in procurement and have created sufficient infrastructure for this. These states are Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab.
The recommendations further add, FCI should move on to help those states where farmers suffer from distress sales at prices much below Minimum Support Price (MSP), and which are dominated by small holding farmers, like Eastern Uttar Pradesh, Bihar, West Bengal and Assam. This is the belt from where second green revolution is expected, and where FCI needs to be pro-active, mobilising state and other agencies to provide benefits of MSP and procurement to larger number of farmers, especially small and marginal farmers.
The warehousing and storage scenario has moved from the state agencies like Food Corporation of Indian and Central Warehousing Corporation to the private players. The government also promotes the private players by subsidies, incentives, loans on low interest rates and other ways. This has been given status of a sector, exempted from service tax.
“The streamlining of the sector has to happen by the operators. For growth, the government provides incentives, doing policy interventions which are already structured and in play,” says Pawanexh Kohli, CEO, National Center for Cold Chain Development.
The regulatory bodies are taking steps to encourage public-private-partnerships especially in the area of crop storage. The government has urged private players to offer scientific management services at their warehouses to reduce wastage.
“Around 95 percent to 97 percent of cold chains existing today are developed and run by public-private-partnership. They have been developed and operated by the private sector, majority of them having taken support from the government in terms of subsidies, incentives and cheaper loans, fiscal benefits of weaver from income tax and service tax,” Kohli further adds.
One of the major players, Sohan Lal Commodity Management (SLCM) is equipped with the technology to offer storage and protection services for the entire range of agri-commodities. SLCM has been handling more than 157 agriculture commodities including cotton, barley, bajra, castor seeds, wheat, pulses, maize, spices, aloe vera, among others across India. The company manages a technology enabled network of more than 760 warehouses and 15 cold storages across 17 states with a total capacity of over 1.76 million metric tonnes spread over 9.62 million square feet area and a throughput of more than 240 million metric tonnes.
Even the India continues to increase the production by various scientific methods, it will keep losing the 10 percent of the produce or even more after the harvest, so addressing the problem of post-harvest losses becomes essential. Addressing the same, SLCM initiated a shift to change the perception from infrastructure driven to scientific warehousing processes. This has been visible in the recent government policy change with its inclination towards scientific warehousing and its promotion.
“We have been constantly innovating methods that have proved instrumental in reducing post-harvest losses from 10 percent to merely 0.5 percent. We have devised Agri Reach which is an amalgamation of warehousing expertise and technological process that result in saving the losses by 9.5 percent on industry standards,” says Sabharwal.
“It is a form of solution that the sector needs to move and initiate implementing scientific methods of warehousing to avoid post-harvest losses. If it is practiced on the entire crop, it can translate into savings of Rs 76,000 crores,” says SLCM CEO.
Another player, Origo Commodities is operating over 350 warehouses and has 3.5 million tonnes of commodities with a value of US $1.5 billion under management. Origo is working with farmers by setting up approximately 100 Farmer Producer Organisations (FPOs) across Maharashtra, Rajasthan, Andhra Pradesh, Telangana and Karnataka.
“The major challenge was that the whole supply chain of agri-commodities remains fragmented. Trust was missing among stakeholders like farmers, procurement agencies and trading houses. That is why diversified product-fold comprises warehousing services, certification, financing, procurement, technology and marketing, forms end-to-end supply chain solutions for agro commodities,” says Kaul of Origo Commodities.
On the other hand, to meet the requirement of the private sector, National Collateral Management Services(NCML) has embarked on an ambitious plan for construction of modern warehousing hubs. NCML is currently implementing its plan to build large warehousing hubs at 40 major market locations across 12 states to build 3.5 million square feet of warehousing capacity at a project cost of Rs 360 crore.
“NCML offers innovative supply chain solutions to its clients that include processors and other rend users. These solutions include an integrated package that encompasses direct purchase from farmers, grading and assaying series, storage and preservation of the produce as well as making available credit for financing the procurement,” says Sanjay Kaul, Managing Director and CEO of the company.
There has been a big issue of rotting foodgrains in the open air in the monsoon in a country where around one third of population live below-poverty-line and don’t have sufficient food and nutrition. Experts opine that the mindset is the biggest problem behind the rotting of foodgrains.
Kohli points out, “The only objective of producing food in the field is to feed the maximum number of people. But, the agencies procure it more than their capacities without having a market linkage. There should be a regular cycle of procuring and dispatching the foodgrains to the end consumers.” He emphasises on creating better market linkage rather than only keeping the produce in the warehousing.
In the innovative way of storage, now few of the agencies do not consider the warehousing infrastructure any challenge. They have developed themselves to that level where they can provide storage facilities in the field in a mere time.
“We do not consider the shortage of warehouses as a concern since we have developed the alternative way, long back. We provide the warehouse management services to our clients in their own or nearby locations within 48 hours. This entire procedure just needs an expense of Rs 35,000 to convert a space into a warehouse. This prevents the farmers to travel from a distant place in search of storage spaces”, says Sabharwal.
This has proved that there is actually not so much shortage in storage spaces but one need to take a call on the operational model.
The agriculture sector is exempted from service tax, if a company hires warehouses on lease, the company has to pay service tax. The industry seeks similar exemption on hiring a space for warehousing agricultural commodities.
Avoiding distress sale
In the absence of procurement agencies, farmers sometimes have to sell their produce below the MSP. To avoid the distress sale of agricultural commodities, the above mentioned HLC has recommended that Negotiable Warehouse Receipt System (NWRS) should be taken up on priority and scaled up quickly. Under this system, farmers can deposit their produce to the registered warehouses, and get 80 percent advance from banks against their produce valued at MSP. They can sell the produce later when they feel prices are good for them.
In a similar move, SLCM has been providing credit to the farmers against their produce since March 2014 through its ‘Kissandhan’ programme. “While we provide storage services to the clients, we also offer them credit. The finance is provided against their harvested crop that they store at our facilities which is used as collateral. This helps the farmer to avoid distress selling below MSP,” says Sabharwal.
For this, SLCM has partnered with leading banks and financial institutions. “This financing system helps farmers to manage their interim cash requirements”, says Sabharwal.
The Way Forward
The waste of foodgrains not only creates losses to the farmers but also hits the economy. And therefore, this is the time to give a paradigm shift to the traditional approach and create better market linkage with the warehousing. Farmers, cooperatives and private players can play vital role in bringing the change in the sector. Moreover, the sector also seeks favourable policy interventions and tax exemptions for sustainable warehousing services.