21-lakh tonne silo storage for wheat okayed as FCI agrees to rent guarantee

In a similar scheme launched in 2015, FCI had refused rent guarantee for unused silos as there was no railway linkage
Chandigarh : The Union government has sanctioned a proposal to build steel silos with capacity of 21 lakh tonnes for wheat storage in Punjab, spread across more than 20 locations that have been finalised and will have railway connectivity. The connectivity will mean a guarantee from the Food Corporation of India (FCI), that it will pay the rent of unused storage capacity for 30 years, it is learnt.
The Food Corporation of India (FCI), central public-distribution agency for which states procure foodgrains, had earlier refused a guarantee due to lack of rail link. But it is now, in principle, fine with the guarantee clause; modalities are being worked out, said state officials involved in the process but unwilling to be named as this point. The shift from traditional brick-and-mortar stores to metal storage in silos can double the shelf life of grains. The capacity of each silo to be built as per the okayed proposal will vary from 50,000 to 2 lakh tonnes.
Wheat production in Punjab this year touched 185 lakh tonnes, a high of six years. Of this, 122 lakh was procured for the central pool, and this accounted for 38% of the total procurement nationally. Storage godowns in Punjab have 123 lakh tonnes of wheat stored, a cause of burden on the state’s storage system. It must here be noted that 65 lakh tonnes of this season’s wheat are stored by covering at plinths, technically called CAP storage. Silos can ease the burden.
The earlier scheme launched in 2015 has not worked well in Punjab, as lack of rail link meant lack of FCI guarantee. State agency Pungrain offered storage guarantee of 20 years, which the government now finds difficult to honour. Of 17.5 lakh tonnes of silo storage planned then, 4.85 lakh came up, and the rest is at different stages. The state food department has issued notices to all successful bidders of construction and operation projects that agreements will be reworked. Now, of the total capacity, state food department and FCI will build half and half. “As per the scheme, state government has to take approval from FCI at all levels — from the tendering process to the fixation of rent once the silos are built,” said Punjab’s principal secretary, food and civil supplies, KAP Sinha.
The decision comes after a meeting taken by cabinet secretary PK Sinha on May 30, in which all states were told to construct silos with special focus on producing states. In that meeting, Punjab had sought the central guarantee for unused storage rent.
The locations include Moga, Malout, Muktsar, Faridkot, Barnala, Jagraon, Ferozepur, Patiala, Kotkapura, Abohar, Tanda, Mansa, Fazilka, and Tapa under the private entrepreneur guarantee (PEG) scheme, which means a private party will invest in building the silo and give assured rent for a fixed period. As per the proposal, return on investment is expected to cover up in seven years. Ajitwal, Muktsar and Patiala will be the big storage points with 2 lakh tonnes of storage each. As per tentative cost worked out by the FCI, storage capacity of 50,000 tonnes in steel silos will be Rs 40 crore. A brick-and-mortar covered godown costs Rs 35 crore for 10,000 tonnes.
In the current year (2018-19), the annual storage charge fixed by the Central Warehousing Corporation is Rs 8.3 per quintal (Rs 42 lakh for 50,000 tonnes), and it is likely to go up next year. Last year (2017-18) it was Rs 7.4 per quintal.