The Hindu Business Line : Warehousing not keeping pace with growing needs

Mumbai March 27 While infrastructure covering roads, airports and seaports remain the focus area for investment, warehousing as a facilitator for the agricultural sector has failed to keep pace with rising farm output.

Lack of adequate warehousing space across the country is well known. Yet, no comprehensive data is available on the total warehousing capacity in the private domain.

There are large number of small godowns across the country, but proper enumeration of their size and capacities is absent. This makes investment decisions challenging.

Agriculture output

If we consider India's aggregate farm production of nearly 600 million tonnes (mt) that includes over 200 mt of foodgrains, 25 mt of oilseeds, over 20 mt of sugar and nearly 100 mt of fruits and vegetables, the enormity of warehousing requirement can be visualised.

Conservatively, 40 per cent of the total vegetable and fruits production and 15 per cent of the total foodgrains production is lost on-farm because adequate warehouses are not located near production centres, experts assert.

"Modernisation of existing warehousing space and investment in large, modern, scientifically-built and managed warehouses is the need of the hour," said Mr Siddharth Amin, Director of Dr Amin Controllers Pvt Ltd, a well-known commodity inspection and collateral management company.

Risk-prone

By their very nature, investments in warehousing are large and return is spread over a long period of time. Unsteady agricultural production from year-to-year makes investment in warehousing risk-prone, Mr Amin said, adding that complex procedures to obtain licenses for storage and conversion of land use need to be streamlined.

Other issues include lack of policy support for warehousing promotion. For instance, because warehousing is capital-intensive in nature, preferential lending rates and tax concessions may encourage entrepreneurs.

Viability factor

In the absence of strong policy support, warehouses have remained largely in the public domain, with Central Warehousing Corporation (CWC) and various State Warehousing Corporations mainly in the fray. Today, CWC has 500 warehouses with the total warehousing capacity of 10 mt, of which around 70 per cent is dedicated to farm-related commodities.

Commenting on the viability of warehousing business, Mr C.T. Thomas, Regional Manager, CWC, said, there is a lot of money floating in the market waiting to be invested, returns are higher and there is demand for this service.

Demand for warehousing services is growing due to the increased participation of domestic corporates, multinational companies, processors and traders in the agricultural sector. In metros there is demand from the retail giants, added Mr Thomas.

Who can invest? Corporates, collateral management companies, processors for building raw material and finished goods inventory and retail giants, suggested Mr Amin.