From being a net food importer in the 1960s, India has marched successfully towards becoming self-sufficient in food production. To put it in numbers and understand the enormity of growth that India had achieved, India’s foodgrains production has increased from 76.67 million tonnes (mt) to over 308 million mt – an increase of over 300 per cent.
While it is a formidable achievement, it is also currently leading us to the problem of plenty as the country faces challenges in managing this surplus. Additionally, agricultural production is currently being increasingly supported by the minimum support price (MSP) and procurement regime.
As a result, the government during 2020-21, procured about 99 mt of foodgrains at MSP. Along with the existing carry forward, the total stocks with the government is estimated at 110 mt by the end of 2020-21. Almost all of it is stored in conventional warehouses or under the shades in the open, resulting in estimated losses up to 4 to 6 per cent (5-7 mt).
Being an agriculture-centric nation using scarce, water feeding the world’s largest population, it becomes crucial that not even a morsel is wasted and efforts in this direction need to be raked up.
Factors for losses
Losses during storage are unavoidable due to biotic and abiotic factors. In order to check storage losses and meet the challenges of increasing production, it is essential that we rethink our storage policy to encourage a shift towards more mechanized and scientific storage methods which can do away with the challenges faced in conventional warehouse storage. India stores 90 – 100 mt of foodgrains annually in conventional warehouses with proper roofs. About 10 mt of foodgrains are stored in open warehouses making them highly prone to loss of quantity and quality. Silos are a traditional method of storage in the western agricultural markets ecosystem for cost-effective bulk storage and efficient logistics. The advantages of silo storage is that it can handle very large capacities (25,000 to 50,000 tonnes and beyond), at a low operational cost due to the scale. Silos require less labor due to high levels of mechanization and enable rapid handling. They effectively check wastage through spillage and rodents, increase efficacy of fumigation, and protection against vagaries of nature.
Though India’s tryst with modern silos started way back in the 1990s, it has come into limelight as large capacity silos are being built by the private sector for both private and public purposes. The recently announced action plan for construction of steel silos in the PPP mode in the country is a boon in the momentum towards modernization of storages. Silos with capacity of 30.75 lakh tonnes (lt) are at various locations have been awarded, of which a capacity of 8.25 lts is complete and the remaining at various stages of development. While a silo of 50,000 tonnes capacity is likely to cost only about Rs 84 per tonne in terms of annual storage costs, a conventional warehouse is estimated to cost about 4-5 times compared with silos. Wastages which tend to be higher in the traditional warehouses further adds to the cost of storage.
However, silo storage has its own challenges. Silos are an efficient mode of storage and part of logistics in so far as they are near to railroads. Though it requires only a third of the land, the silo developers require a long stretch of land for building better connectivity to the railroads adding to the cost of silo construction. The major challenge for storing grains in silos in India is homogeneity of the grains. The standardization regime for agricultural commodities needs to move towards suitability of a given quality for human/animal/industrial consumption purposes. As India’s per capita income levels increased, urban population grew, consumption of processed foods is going up and now is the better time to simplify standards as per end use focusing mainly on food/feed safety and the choice of the industry. This calls for the orientation of our standardization of the grading system based mainly on the physical and chemical properties setting aside the varietal differences. Further, needs to be backed up by a robust quality testing and certification mechanism known for its speed and accuracy in addition to accessibility at the last mile.
The grain storage of the future would continue to need more efficient ways to reduce wastages and cost of handling, besides embedding storage as a part of the agricultural commodity logistics chain. Orientation of quality testing and food safety standards policy is essential for the success of mass storages such as silos. Silos would also bring technological advancements such as more sophisticated condition management sensors, agnostic software for troubleshooting, robotic elements facilitating automation and easier ways to harness important storage processes. Silos and the emerging technologies would enable sensor-based assurance of the quality of stored grains not only to farmers/traders but also to the collateral managers/lenders. Technology shall also enable early warning signals against potential large scale damage that can occur enabling provision of cost effective insurance solutions for the stored grains making it less risky to lend. Though silos are not a modern technology or intervention, we need to rethink our storage regime towards bulk storage solutions such as silos with embedded modern tools of technology. As we move up in our foodgrain production we would need cost effective storage solutions to meet the policy ambition of doubling farmers’ incomes and to connect commodities to the world of finance through a cost-effective collateral management regime empowered by modern technology.
The authors are Consultant and Professor of Practice with the National Institute of Securities Markets. Views are personal.