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Rot in FCI runs deep, makes investors wary

As part of the country's plan to create additional covered storage facility of 150 lakh metric tonnes in the next two years, Pungrain -- a Punjab government procurement agency -- has been inviting private parties to set up their godowns. Manish Tiwari reports.

india Updated: Jul 29, 2010 02:02 IST
Manish Tiwari

As part of the country's plan to create additional covered storage facility of 150 lakh metric tonnes in the next two years, Pungrain -- a Punjab government procurement agency -- has been inviting private parties to set up their godowns.

However, it has been forced to cancel the tenders twice in the past seven months.

Reason: investors are not showing much interest.

Of the 71 lakh tonne-storage the state wants to create, Pungrain received proposals for only 16.85 lakh tonnes. And those who wanted to do it quoted very high rates -- a monthly rent of Rs 5 to 13 per square foot.

Pungrain -- which procures foodgrains and stores it on behalf of the FCI -- presently pays a monthly rent of 32 paise to Rs 2.50 per square feet.

"There is a complete trust deficit. There are no uniform criteria... no fixed rates. You are always at the mercy of FCI officials," said Varinder Singh who owns a 10,000-tonne capacity godown in Sangrur

Land prices are so high in Punjab that the new investors are not keen to take much risk, he added.

In Punjab, it's well known what FCI officials can do. They can hire a godown, de-hire it...pay the full rent on a general hiring basis or just on the basis of number of bags stored in it. They can even restore the status in a couple of months.

"You can't question them. If you do it, you are finished," said Col T S Dhillon, a godown owner in Amritsar.

In the past, several owners paid the price for being vocal: their godowns are lying vacant -- some for the past 10 years.

For example, 128 investors set up 25 lakh metric tonnes covered storage capacity in Punjab in 2001-02. For seven years, they didn't face problems. But in November 2008, the FCI suddenly placed 28 godowns under the actual utilisation basis (payment is based on the number of bags stocked in the godown).

Within two to three months, however, most of them got a reprieve as they were again put in the general hiring category (a criteria which allows godown owners to claim full rent) -- that too with a retrospective date.

"Only FCI officials can explain how they do this. They de-hire a godown or place it under AUB even when the godowns are full," said a godown owner.

"What matters is money. You grease their palm and the work will be done."

(Tracking Hunger is an HT and Mint initiative to investigate and report the struggle to rid India of hunger. You can read previous stories at www.hindustantimes.com/trackinghunger)