FCI to award contracts for 2.5 MT of silos via PPP mode this week

By Sandip Das

The Food Corporation of India (FCI) is likely to award contracts for the construction of wheat silos with a capacity of 2.5 million tonne (MT) under the private public partnership (PPP) model this week, according to official sources.

These silos are expected to be built over the next two to three years, with investments of more than Rs 2,200 crore.

Silos are sub-mandi yards, which could bring ease of procurement of grains for farmers and lead to significant reduction in logistical costs.

Of 3.4 MT of silos awarded to private entities, around 1.2 MT capacity has been created while 1.2 MT capacity storage facilities are at various stages of construction.

Last month, contracts for 1.1 MT capacities silos were awarded to private parties whose construction will commence shortly.

Sources said that private entities including Adani Agri Logistics and KCC Infrastructure have been awarded the contracts.

Currently, the silos are being built under the design, build, fund, own and transfer (DBFOT) mode, under which the land is owned by the FCI and via the design, build, fund, own and operate (DBFOO) model, under which land belongs to private entities.

Also read: FCI’s paddy procurement up by 11% at 53 million tonne

Food ministry officials said that after new contracts are awarded this week, total silos constructed and awarded will be 6 MT with an estimated investment of Rs 6000 crore.

This is part of a broader Rs 9,400-crore project to build wheat silos with 11 MT of capacity during the next three-four years under the PPP mode. These silos will be spread over 249 locations across Punjab, Haryana, Madhya Pradesh, Uttar Pradesh, Rajasthan, Gujarat, Maharashtra, Bihar, West Bengal, Jammu, Uttarakhand and Kerala.

Silos will be used for storing wheat for the FCI. The corporation will use these for storage of wheat through a lease of 30 years with private entities. Fixed storage charges to be paid by the FCI to private entities, based on a per-tonne, per-year basis, are the bidding parameters.

This fixed charge escalates by 70% of the wholesale price index and 30% of the consumer price index.

In 2005, under a pilot project to modernise storage infrastructure, construction of 0.5 MT of storage capacity under the build, own and operate (BOO) model was carried out by Adani Agri Logistics. Subsequently, on recommendation of a high-level committee chaired by former food minister Shanta Kumar in 2015, construction of silos with railway sidings commenced.

Then the food ministry approved a ‘hub and spoke’ model because of challenges faced in land acquisition for railway sidings.

As part of a pilot initiative, two rice silos with a combined storage capacity of 25,000 tonne are currently being built at Buxar and Kaimur in Bihar, by National Commodities Management Services Limited (NCML), a leading player in collateral warehousing management.

The FCI stores on an average 40 – 50 MT of rice and wheat on an average for ensuring supplies to beneficiaries under the National Food Security Act. Silos ensure better preservation of food grains.

This article has been republished from The Financial Express.