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Day 31 – Q 1.Critically evaluate the performance of existing storage mechanism for agricultural produce in India. What innovations are needed to create a more robust and efficient storage infrastructure? Suggest.

1. Critically evaluate the performance of existing storage mechanism for agricultural produce in India. What innovations are needed to create a more robust and efficient storage infrastructure? Suggest.

भारत में कृषि उपज के लिए मौजूदा भंडारण तंत्र के प्रदर्शन का समालोचनात्मक मूल्यांकन करें। अधिक मजबूत और कुशल स्टोरेज इंफ्रास्ट्रक्चर बनाने के लिए किन नवाचारों की आवश्यकता है? सुझाव दें।


The Food Corporation of India,  Central Warehousing Corporation (CWC), and State Warehousing Corporations are responsible for large-scale storage and warehousing capacities in the country. The Directorate of marketing and Inspection of the Department of Agriculture provides consultancy and technical services to prospective entrepreneurs for the construction, maintenance and operation of cold storages.


Present mechanism of Food storage Management in India:

  • Food Corporation of India (FCI) is the nodal agency under Ministry of Consumer Affairs, Food and Public Distribution responsible for the procurement, storage and movement of food grains, public distribution and maintenance of buffer stocks.
  • FCI procures food grains at minimum support price (MSP) from farmers on an open-ended basis (i.e., accepting all the grains that are sold to it by farmers), provided the food grains meet Govt. of India’s uniform quality specifications. The procurement is also done by State Government Agencies (SGAs) and private rice millers on behalf of the FCI.
  • All the procured food grains form the Central Pool. The grains are moved from the surplus states to the consuming states for distribution and for creation of buffer stocks and stored in FCI godowns.
  • The food grains are also disposed by FCI and State Governments through sale under Open Market Sales Scheme (OMSS) i.e., selling food grains at predetermined prices in the open market from time to time to enhance the supply of grains especially during the lean season and thereby to moderate the open market prices especially in the deficit regions.
  • The economic cost to FCI includes acquisition cost of food grains at MSP, procurement incidentals (e.g. labour & transport charges, godown rentals) and distribution cost (freight, handling, storage & interest charges, losses during storage etc).

Critical evaluation of storage mechanism:

A report from ICAR, post-harvest losses of foodgrains in India is around 6% and 18% for fruits and vegetables due to lack of storage infrastructure.

  • Excess of buffer stocks: Open ended grain procurement has increased food grain stockpiles beyond the needs of food security. E.g. By June 2019, FCI and state agencies stockpiled 76.1 million tonnes of staples (wheat and rice) against the requirement of 61 million tonnes.
  • Lack of storage: Due to inadequate number of godowns for storage, a part of procured grains is maintained as outdoor stacks (‘Cover-and-Plinth’ system), which face high risk of rain damage and pilferage. Further, no automatic liquidation rule strains the storage capacity. Ideally, FCI should sell all grains above buffer stocks in open markets. But there is no such rule and offtake happen only on the directive of the ministry.
  • Food inflation: The present storage mechanism involves procuring 75% of the market surplus. Such stocking of food grains which otherwise could have been sold in open markets adds to food inflation.
  • Countercyclical procurement policy: In drought years, when the production is low, Government increases MSP and stock uptake from farmers. This reduces the supply of grains in open market and pushes the prices high.
  • Poor quality of food grains & high wastage: Due to insect infestation, microbiological contamination, physiological changes due to sprouting and ripening etc., the shelf life of food grains remain poor. Lack of irradiation facilities also impedes long term storage.
  • High costs for government: Fiscal load of procuring, carrying & maintaining excess stock is over ₹1 trillion and adds to the food subsidy bill.
  • Marginalization of private trade: Existing system of food storage management in India is dominated by the Government. This has resulted in limited technology upgradation in storage mechanism and low capital investment.
  • Corruption: According to Shanta Kumar Committee, 40-60% PDS food grains are siphoned from FCI godowns to black markets. Many such scams, like Punjab Wheat Procurement Crisis 2016, have come into the light recently.

Innovations needed:

Agriculture storage plays a major role in remuneration of price to the farmer and needs innovation in its mechanism which includes procurement method, transportation etc., which have an impact on the storage capacity.

  • Excess buffer stocks can be allocated to poor over and above their monthly quota of 5 kg under National Food Security Act (NFSA).
  • Procurement as a means of price support can be replaced with price deficiency payment and direct income support to the farmers, as envisaged in PM-AASHA and PM-KISAN schemes.
  • Decentralized Procurement Scheme (DCP), introduced to reduce transport cost and leakages, has been adopted by a very few states.
  • Outsourcing grain-storage function and privatization:
    • Private Entrepreneur Guarantee (PEG) Scheme to construct godowns in PPP mode.
    • Grameen Bhandaran Yojana to provide capital investment subsidy scheme to build and renovate rural godowns
  • Replace “cover and plinth” godowns with “Silos” with mechanized / robotic assemblies.
  • Transport Reforms: 
    • Transport grains in containers rather than gunny bags to reduce losses and faster-turn-around time at railways and waterways. 
    • Construct silos at mandis, and provide rail connectivity to them.
    • Perishable commodities should be transported in Reefer Vehicles for refrigerated transport 
    • End to End computerization and online tracking from procurement to retail distribution.
  • FCI Reforms:
    • Outsourcing its procurement functions to private players and state government wherever it is not necessary like Punjab, Haryana etc., and focus on states with small and marginal farmers like Bihar, UP etc.,
    • Pro Active Liquidation Policy for Excess Buffer Stocks: Whenever FCI’s inventories have grains above buffer norms, it should automatically sell excess stock in open market (domestic or exports).
    • Popularize Negotiable Warehouse Receipts (NWRs) system which will make the storage of foodgrains attractive.
    • No need of physical procurement if market prices are less than the MSP. Farmers should be given the difference the two, through DBT directly into their bank accounts.


Doubling farmer income by 2022 involves reforms in storage mechanism. The recommendations of Shanta Kumar committee as well as Ashok Dalwai committee on storage mechanisms needs to be improved for reducing losses, avoid distress sale and make available decentralized storage units reducing transportation costs. Measures taken by the government including GST which helped establishment of warehouses are laudable and more reforms boosting the mechanism is needed.

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