Allocation for warehousing to boost farm output, tame inflation

The proposed allocation of ₹5,000 crore to increase agriculture warehousing capacity in the country will give a significant boost to this sector, but industry players feel a lot more could be done to narrow the yawning demand-supply gap in warehousing capacity.

Indeed, creating warehousing capacities and concomitant supply chain infrastructure can be an effective weapon to combat food inflation. For, Government estimates indicate that about ₹50,000 crore is lost annually due to post-harvest losses, a major scoop of it due to inadequate storage and transportation facilities.

Apart from this, good quality warehouses can improve the quality of agri products, besides check hoarding, both of which could be used to tame inflationary pressures.

Industry players say this allocation, coupled with the step to allow Nabard to finance warehousing projects directly from last year, instead of playing the role of a re-financer to banks, could spur fresh private investments in this sector.

Currently, estimates by Nabard indicate that the supply gap for storage of all major agri-commodities and chemical fertilisers has bulged from 11.75 million tonnes (mt) in 2012-13 to 12.04 mt last fiscal. The available capacity was 8.48 mt against a demand of 20.52 mt, including 17.33 mt for major crops and 3.19 mt for chemical fertilisers.

It is projected that the gap could increase to 12.30 mt in the current fiscal – while supply would nudge up to 9 mt, the demand would soar to 21.31 mt, including about 18 mt for crops.

Out of this gap, a major portion of almost six mt would be in eight States, led by Uttar Pradesh with a shortfall of 1.78 mt, Rajasthan 76 lakh tonnes, Madhya Pradesh 68 lakh tonnes, Andhra Pradesh and Telangana combine 52 lakh tonnes and Punjab 50 lakh tonnes.

Creation of storage infrastructure is balked by the requirement of huge capital. “An investment of at least ₹12 crore is needed to set up a five-acre warehousing facility that can store about 20,000 tonnes. But the payback time could stretch to 12-14 years,” says Aditya Bafna, Promoter and Executive Director of Shree Shubham Logistics, a subsidiary of Kalpataru Power Transmission Ltd.

The credit requirement is thus huge. Nabard estimates that just to bridge the supply gap of two million tonnes for cold storage capacity for horticulture products, the credit support (of 75 per cent) would be ₹1,125 crore, with borrowers contribution being ₹375 crore.

“Capital subsidy, tax incentives and interest subvention could have given a further boost to the sector, along with the proposed budgetary allocation,” Bafna says.

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