India is said to have 143 million tonnes of constructed storage capacity and while this is reportedly about 35 percent short of need, large warehouses go unoccupied when farmers and players in the agricultural supply chain scramble for them.
One reason is there is no comprehensive directory of private warehouses. While the warehouses of Food Corporation of India, Central Warehousing Corporation, state warehousing corporations and those accredited to the Warehousing Development and Regulatory Authority (WDRA) are mapped, it is difficult to track private ones.
So the portal www.A2ZGodaam.com which Arya Collateral Warehousing Services launched on 17 August should enable users to locate warehouses where and when they need them, reports Vivian Fernandes.
According to Prasanna Rao, Managing Director and CEO of the company, the portal has a list of about 2,000 warehouses in 200 districts with 2.5 million tonnes of produce worth about Rs 2,000 cr. The company has verified and certified the warehouses and they are searchable across many parameters like lease rental, insurance status, WDRA-accreditation, distance from regulated market yards or railway sidings, the availability of fumigation services and so on. About 18 banks will provide financing against their warehouse receipts.
Speaking during a panel discussion at the launch of the portal, Vivek Saraswat, Head, Logistics and Execution, Louis Dreyfus, said trading companies like his cannot sometimes find storage space for the produce they have contracted. This year, in Madhya Pradesh, the government has taken up much of the warehouse space to store procured wheat. He said the portal should have videos of the godowns and also a ‘compare’ function so that users can choose the one that suits them best when choice is available.
Louis Dreyfus, he said, had tried to set up warehouses in India, but they were not profitable. He says there is acute price competition. Those with land and black money want avenues to invest. With the government providing capital subsidy, they think warehouses will give them good returns. On a note that may not be received well in India, he said Pakistan’s warehouses on average were better than those of India and Bangladesh. (In India, Louis Dreyfus trades in coffee, wheat, maize, barley, cotton, sugar, oilseeds and chana).
Arindom Datta, Executive Director, Rural and Development Banking, Rabobank Foundation said information asymmetry can raise transaction costs and risk costs – a reason why banks have traditionally shied away from financing smallholder farmers. A2ZGodaam, he said, provides credible and dynamic information to players in the value chain. For banks cash flows are important, and as more cash flows are captured as produce moves from farmers to consumers, the activity becomes more attractive for financiers. He said lenders face a risk of fraud and technology can help avert them.
Ashish Mondal, Director, Action for Social Advancement, an NGO that promotes farmer producer organisations (FPOs) said much of the storage in rural areas is done by traders. The warehouses are unorganized and also not professionally managed. The FPOs that he works with store seed for about six months. They do not have the capacity to bear the risk of storing grain. Even for aggregation, they don’t have the capital.
Sachin Sharma, Head, Channel Operrations, ITC said warehouses will need to be tailored to changes in production and demand. So far, farmers sold whatever they produced. But for branded commodities, attribute-based production becomes important. Consumers might prefer low-gluten wheat, or rice fortified with iron and zinc, or pulses with extra protein. Some might want their food to be produced organically. So the warehouses will also have to be designed accordingly. He said sustainability and traceability are also getting emphasised.
With the government deregulating agricultural trade, more private players will come in. Warehouses traditionally have come up in the states where procurement of rice and wheat was high – Punjab, Haryana, western Uttar Pradesh and Andhra Pradesh. Now that produce can be bought even outside the regulated market yards without payment of market cess, and with warehouses allowed to be marketplaces, there will be a lot of interest in warehousing.