Adani In Talks With Food Corp Of India To Build Storage

Indian trading house Adani Group is in talks with the Food Corp. Of India to expand grain storage facilities to bridge the current shortfall in warehousing.

India has world's largest network of state-run outlets to sell grains below market prices to the poor and the government buys more than 50 million metric tons of wheat and rice from growers annually to run the subsidized program.

The increase in government's grains procurement in the past few years has left a yawning gap between the growing stockpile and limited storage space. Millions of tons of grain is being stored in the open, under cover-and-plinth, despite the risk of damage due to natural causes such as rains and flooding.

The government annual procurement of rice has increased to more than 31 million in the past two years from 17 million tons in 1999-2000. Wheat procurement has risen to more than 22 million tons a year, from 14 million tons earlier.

"We are having a discussion with FCI to develop integrated storage networks at various locations in the country," said Sandeep Mehta, chief executive for Adani Group's container and logistics business.

He said Adani Group had earlier constructed 550,000 tons of bulk handling and storage capacity for FCI under a "built-to-suit" project.

There is a need to undertake more such projects because of the rising stockpile of wheat and rice in India, he said.

Under the "built-to-suit" project, the Adani Group linked surplus grains producing farmlands of Moga and Kaithal in Punjab and Haryana by rail to deficit regions of Mumbai, Kolkata, Coimbatore, Bangalore and Chennai.

"It is an integrated project under which we own the silos, railway sidings and wagons while the government guarantees the storage volume and pays the handling charges and lease rentals," said Mehta.

However, the volume of grain administered by the project is a small fraction of the total wheat and rice handled by the government.

"We aim to set up similar facilities at other places," Mehta noted.

The government had originally proposed such integrated circuits of silos linking surplus and deficit states in 2001-02 when grain stocks rose to a record 64.8 million tons. However, the scheme didn't take off as bulk of the excess stock was exported and there was a further drawdown in stocks following the drought in 2002.

India's grains stockpile has shot up again with the government holding 50 million tons of wheat and rice at the start of September. The government's buffer stock norms require only 21.2 million tons at the start of October.

In June, government invited private companies to invest in warehousing, guaranteeing subsidies, tax benefits and contracts from FCI for at least seven years. Last month, the government increased the guaranteed lease period to 10 years.