Grains without shelter

There is a huge shortage of warehousing in India. But a hostile policy environment is discouraging private investment. Varghese K George reports. Loss in numbers

The severe shortage of quality storage space is destroying large quantities of India’s food grain stock, as recent reports in Hindustan Times have illustrated. The issue was discussed in the Rajya Sabha on Tuesday but Agriculture Minister Sharad Pawar’s statement did not indicate any fresh thinking by the government on the issue. A member recalled that the minister roughly said the same thing he did in 2004, the year that saw drought-like conditions.

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According to Pawar, India must add a warehousing capacity for 15 million tonnes at Rs 4,000 crore in the immediate term. The current five-year plan targets constructing additional space to house 30 million tonnes. Capacity building in warehousing is progressively declining with every successive five-year plan. India created a capacity for 24.6 million tonnes during the sixth plan (1980-85), 24.8 million tonnes in the seventh and merely 3.17 million tonnes in the 10th plan.

The government wants public-private partnerships (PPPs) in warehousing. “The Food Corporation of India (FCI) has a lot of land. There is scope for viable PPPs,” says K.V. Thomas, union minister of state for agriculture. But few private players have shown interest.

The lukewarm response of the corporate sector towards an area where demand exists may be difficult to understand, but the HT reports pointed out several factors that discourage private investment. Irrational government controls and too much discretionary powers are at the root of the problem. For instance, government agencies hire and de-hire warehouses arbitrarily and unilaterally set rates, breeding a heavily corrupt system.

“Investors do not want to put money in a sector unless there is some guarantee for their investments,” said Akali Dal Rajya Sabha member Naresh Gujral.

Gujral has written to Prime Minister Manmohan Singh recently, calling for disaggregating the procurement and storage operations of the FCI and privatising storage operations completely. “FCI’s role should be limited only to procurement of food grains and thereafter dispatch to various state government agencies. It should have nothing to do with storage. This step would reduce corruption,” Gujral wrote.

Not only must India exponentially increase warehousing space, the quality of warehousing should also be better. For India's farm sector to be sustainable, diversification is necessary. Horticulture, floriculture and vegetables must constitute a bigger share of our agricultural basket and these sectors must be linked to both national and international markets efficiently.

Without increased private participation, this is not possible. In the prevailing atmosphere of trust deficit, private players are wary. Several suggestions are before the Prime Minister and the government to open up the sector and facilitate investment. However, agencies and officials benefiting from the control regime of the past are resisting reforms and modernisation of the crucial sector.

(The Hunger Project is a Hindustan Times effort to track, investigate and report every aspect of the struggle to rid India of hunger. You can read previous stories in this series at www.hindustantimes.com/hungerproject)