Evaluation of Storage and distribution of food grains in India

Evaluation of Storage and distribution of food grains in India
Term Paper on Organizational management

Submitted by
ARUN KRISHNA

MBA 1st Year
9986592779

October, 2012

INDEX
Sl.No.
Topic
Page Number
1.
Introduction
3
2.
Indian Warehousing needs and management – An Overview
3
3.
Main threats to stored grains
5
4.
Storage facilities at various levels
6
5.
Standardization of grain quality
8
6.
Evaluation of Storage Capability and Quality available in various states compared to their production
10
7.
Advantages and disadvantages of modern bulk storages compared to farm level storages
10
8.
A case study on the comparative costs of conventional godowns and modern silos
11
9.
Evaluation in Various means of Storage of grains
11
10.
Profit from Storing the food grains to sell during off season

13
11.
Transportation of food grains

16
12.
Conclusion

18
13.
Bibliography
19

1. Introduction
About 60-70% of the total food grains produced in the country are stored in the farm level. Official estimates by Planning commission of India indicate that substantial quantity of food grains (about 6% to 10% of the total production) are damaged due to moisture, insects, rodents and fungi. Erosion in quality of the grains due to improper storage is another major threat. Every grain saved is a grain produced and hence the safe and sound storage of the precious food grains is vital for a country like India in which 42% of population is malnourished. Recent UN estimate has indicated that 32% of our population is below poverty line and 20% suffer from food insecurity. India has more than 200 million food insecure people, the largest among all countries. The International Food Policy Research Institute’s Global Hunger Index ranked India 67th out of 81 countries. Green revolution and the government incentives extended to farmers have resulted in bumper harvest over the years. India has matured from a food deficient to a food surplus state. However poor storage and distribution is a major hindrance to develop into a food secure country. Government is procuring food grains directly from the farmers against “minimum support price” to ensure adequate returns to them. However the storage and distribution management is still a highly underdeveloped entity in our country. Recently about 1.5 million tons of food grains have started rotting in our substandard storage facilities forcing the supreme court to intervene and distribute these grains to poor people free of cost.
2. Indian Warehousing needs and management – An Overview
India is a vast country with diverse land forms and climatic conditions. When some regions are suffering from draught some other zones may be affected from flood. Substantial population still suffers from acute poverty and malnutrition. Food grain storage and distribution management has great importance in such a scenario. This has been rightly given topmost priority in the fifth five year plan. A study conducted by United Nations also reveals a very alarming storage and transportation inadequacy in India. Current deficit in storage capacity is more than 13 million tons. The quality of the facilities are also well below international standards.
Annual Production of wheat and rice in India and the procurement by government are given below

(Source : “Report of working group on Warehousing development and regulation for the twelfth plan period (2012-17)” Planning Commission, Government of India)
The ware housing capacity of public, co-operative and private sector is only 108.75 million tons.

(Source : “Report of working group on Warehousing development and regulation for the twelfth plan period (2012-17)” Planning Commission, Government of India)
Warehousing plays a vital role in promoting agriculture marketing and food security. It enables the market to ease pressure during harvest season and to maintain an uninterrupted supply of agricultural commodities during off season. This solves the problems of glut and scarcity inherent in agricultural marketing. Though warehousing is an independent activity, it is closely linked to production, consumption and trade. Private sector initiatives are small and sporadic in this sector. Warehousing is a capital intensive sector and requires extensive finances from banking and other financial institutions.
Close interaction and extensive planning are required between different stake holders like FCI, CWC, SWCs and Co-operative sectors to meet the challenges ahead. Current short fall is significant and is expected to rise further in the future. Measures to lure the private sector to make massive investment have become a necessity. Public warehousing alone is not able to meet the huge demand. Planned expenditure to augment the existing facilities can hardly meet the modernization requirement leaving out any possibility of capacity expansion.
Storage and transportation management requires multifaceted approach including the mechanization and modernization of existing storage facilities, improving the storage facilities in farm level, development and adoption of scientific methods of moisture control, drying, pest & insect control and microbial inhibition.
Existing warehousing and other storage facilities have to be surveyed and mapped. Shortfalls in capacities both at national and state level have to be worked out. Plans to overcome the deficiencies have to be sought and implemented.
3. Main threats to stored grains
United Nations have conducted numerous studies about the loss of quantity and quality of stored grains in under-developed and developing countries. Major threats are from moisture content, fungi, insects, temperature, rodents and microbes.

(Source : “Report of working group on Warehousing development and regulation for the twelfth plan period (2012-17)” Planning Commission, Government of India)
Permissible limits of moisture content for various food grains are given below.

(Source : “Research and development issues in grain post-harvest problems in Asia...”, FAO Corporate document depository. http://www.fao.org/wairdocs/x5002e/X5002e02.htm)
Harvested grains have large moisture content and need to be dried before storing. Drying of the grains is often carried out by traditional methods by exposing to sunlight. However this method is inadequate in monsoon season and for meeting stringent requirements for long term storage. Special dryers have to be installed to meet the international standards. This will lead to both large capital investment and running costs. Farmers may not be able to afford this additional expenditure. Further they do not have the means to get the extra income for the better quality of the stored grains. Dryers can be installed in co-operative level with funding from government and banks. This scheme has been introduced in some areas of Punjab successfully. However extending this facility to subsistence farms in Andhra Pradesh, Orissa and Tamilnadu is essential. Fungi are another major hazard for stored grains. They feed on stored grains. Grains develop bad taste and become less nutritious after fungi attack. The germination power of the seeds also deteriorates. They are also very difficult to recognize. Proper temperature control is the best method to tackle this menace. Insects are another source of grain loss. They are better controlled by natural additives or repellants. Neem leaves and certain oils are good natural repellants. However permitted chemicals and insecticides are also being used in which case precautions are to be taken not to exceed the permitted dosages. Fumigation is also found to be effective. Rodents are better tackled by rodent-proofing. However rodenticides, rodent-traps and rodent catching dogs and cats are also employed.
Temperature control is another important task during storage. This prevents growth of harmful micro-organisms. Air-tight containers with water absorbing materials are employed in large silos.
4. Storage facilities at various levels
i) Farm level
The storage in farm level assumes great importance as 60-70% is stored here. Highest loss from storage inadequacies are from this traditional mode of preserving grains.
Coal tar drum bins and bag storage are the popular methods. Traditional containers are made from locally available materials like straw, mud, bamboo, wood, cow dung etc. Improved storage structures like PAU bin, Pusa bin and HapurTekka have been developed by agriculture institutes and universities. These are found to improve the storage and are gaining in popularity. PAU bin is a galvanized iron container developed by Punjab agricultural university. Pusa bin is age-old mud brick structure improved by providing a coating of polythene film. HapurTekka is a rubberized cylindrical container with bamboo poles supported on a metal base. They are neither rodent-proof nor safe from fungal and insect attack. Some of the major considerations for constructing a storage structure to minimize losses are:
The structure should be elevated and away from moist places in the house.
As far as possible, the structure should be airtight after loading and unloading.
Rodent-proof material should be used for construction of rural storages.
The area surrounding the structure should be clean to minimise insect breeding.
The structure should be plastered with an impervious clay layer to prevent attack by termites and other insects.

Underground Storage in Khattis Practiced in northern India, this method of farm storage is used in dry regions where the water table does not endanger the contents. They are long term storage pits of varying capacity from a few hundred kg to 200 tonnes. The entrance to the pit may be closed either by heaping earth or sand on a wooden board cover, or by a stone sealed with mud. The advantages of khattis are:
Few problems with rodents and insects.
Low cost of construction.
Ambient temperatures are relatively low and constant.
Being indoors and invisible it is relatively safe from thieves.
No need for continuous inspection.

The disadvantages of khattis are:
Construction and digging are laborious process.
Storage conditions adversely affect the germination capacity of grains.
The grain can acquire a fermented smell after long term storage due to humidity.
Removal of grain is laborious and can be dangerous because of the accumulation of carbon dioxide in the pit.
Inspection of the grain is difficult.
Risk of penetration by water, insects and rodents is high and the grain at the top and in contact with the walls often becomes mouldy. ii) Village level
Co-operative storage facilities are often used in village level to improve the storage condition. Larger investment permits longer storage life and reduced loss during storage. This is found to improve the returns for the farmers in the long run. However most of the co-operative sector storage facilities are primitive and often not properly maintained. Government and financial institutions are providing funding on a long term basis to improve the co-operative sector in grain storage and handling. iii) State and National levels
FCI, SWCs and CWC have provided bulk storage facilities. Most of the facilities are in the form of grain go-downs which are being converted into modern Silos in a phased manner. However the major concern is that the capacity is practically stagnant due to expenditure on modernization of existing bulk storages. iv) Agri-Logistic Parks
They are a novel concept introduced with private sector participation. These are integrated facilities for warehousing, cold chain for perishables and non-perishable agricultural produce along with transportation facilities. Most of these are located in special economic zones (SEZ) areas.
5. Standardization of grain quality
This is a mandatory requirement for grading the farm produce and ensuring the returns to farmers for better quality products. Standards have been developed by Indian Standards Institution for stored grains. There are 13 IS standards indicating the specifications for traditional and improved variety of storage containers.

Indian standards for storage structures and storage management are given below.
Sl No.
IS Number
Title
1.
IS 607-1972
Bagged food grain storage structures
2.
IS 8453-1977
Bins, earthern, polyethylene embedded for bulk storage of food grains
3.
IS 7715-1975
Bins for safe storage of food grain, method to test suitability of.
4.
IS 600-1955
Code of practice for 'Bukhari ' type food grain storage structure
5.
IS 5826-1970
Flat storage structure for food grains (cap. 200 t)
6.
IS 6201-1971
Flat storage structure (cap. 100-200 t)
7.
IS 601-1955
Code of practice for construction of Kothar type rural grain storage structure
8.
IS 602-1969
Silos for grain storage (Part I) construction requirements
9.
IS 5503-1973
Part II-Grain handling equipment and accessories
10.
IS 7174-1973
Steel bins for domestic storage (Part I)
11.
IS 5606-1970
Steel bins for grain storage
12.
IS 6151-1971
Part II-General care in handling and storage of agricultural produce
13.
IS 603-1960
Underground rural food grain storage structure
Specifications of impurity levels permitted in stored grains have also been specified impurity levels (%) permitted in Maize is given below
Sl.No
Impurity
Quantity
1
Foreign or deteriorated odour, additives, toxic substances
0
2
Pesticide residues, other contaminants
Foreign matter 2 out of which
Inorganic matter 0.5
Filth 0.1
3
Moisture content
15% of wet grain
4
Bulk density
70 kg/hectaLitre
5
Broken grain
7
6
Shrivelled grain
8
7
Unsound grain
1
8
Grain attacked by pests
2
9
Other cereals
3
10
Extraneous matter
2
11
Harmful seeds, ergot
0.5
12
Falling number
160
(Source : “Grain storage techniques-Evolution and trends in developing countries”
Edited by D.L. Proctor, FAO Consultant, FAO AGRICULTURAL SERVICES BULLETIN No. 109)

Fair Average Quality (FAQ) is practiced for buying and selling of grains by national and international agencies. Quality is assessed by taking representative samples from the grains randomly from different zones and inspecting them to meet the FAQ quality norms. The consignment is first divided into primary units of equal sizes. For bagged grains each bag may be regarded as the primary unit. For bulk grain primary unit is generally taken in terms of weight or volume. Most countries adopt ISO 950 “Cereals-Sampling (as grain)”
Minimum working sample for inspection as per ISO 950 is given below for common grains
Maize (Small grain)
200g
Maize (Large grain)
250g
Sorghum
25g
Cow peas
150g
Wheat
25g
Millet
10g
Paddy
15g
(Source : “Grain storage techniques-Evolution and trends in developing countries”
Edited by D.L. Proctor, FAO Consultant, FAO AGRICULTURAL SERVICES BULLETIN No. 109)

Selection of bags for sampling (ISO 950)
Up to 10
Every bag
11 to 100
10, Drawn at random
Above 100
Square root of total number of bags, drawn according to a scheme

Grain quality is often assessed by bulk density, foreign matter, moisture content and sieving using standard sieves for broken and damaged grains.
6. Evaluation of Storage Capability and Quality available in various states compared to their production
Sl. No
State
Wheat Production as % of Total Production
Bulk Storage Capability as % of their production
Quality of Stored grains
1
Uttar Pradesh
33.02
33
Acceptable
2
Punjab
19.26
50
Very Good
3
Haryana
13.27
40
Good
4
Rajasthan
9.31
22
Very Good
5
Bihar
5.16
20
Acceptable
6
Gujarat
3.16
40
Very Good
7
Maharashtra
2.15
48
Good
(Source : “State wise multi commodity exchange of India” http://www.nmce.com/files/study/wheat.pdf)
7. Advantages and disadvantages of modern bulk storages compared to farm level storages:
Advantages
Minimisation of loss due to spillage.
Disinfestation is more effective and hence insect losses are minimal and no bird losses.
A centralised system for inspection of food grains and also for carrying out operations like fumigations, aeration etc.
Quality can be maintained easily.
Human errors are avoided to a better extent.
Processing operations are carried out in a planned manner.
Low running costs.
Possible to mechanize all operations. All loading, unloading, weighing etc. are done mechanically.
Lesser Land Costs. The area of land required for Silo storage is only about one fifth that of conventional storage godown.
Better utilization of space.
Grains can be stored for a long time and can fetch better prices for the farmer.
Quicker handling of grain.
Simultaneous storage of different kinds of grain, such as wheat, paddy, gram, bajra, maize in the different bins at the same time.
Long storage without deterioration or loss. There is no access to insects or rodents. Aeration and fumigation can be done when necessary to preserve the condition of grain. Grain can be stored as long as five years.
There is usually provision for thermocouple temperature record system in the plant itself.
Fool-proof arrangement exists in respect of physical check of Food Grain stored in silo in bins.
Consumption of fumigant is very nominal.
Saving of sacks (Gunni) & Skilled handling labourers at the time of storage.
Disadvantages
Huge capital investment
Need the modernization of transport sector
8. A case study on the comparative costs of conventional godowns and modern silos
Item
Silo System, Rs.
Godown system, Rs.
Capital costs
Land
20000
(1850 m3)
60000
(5550 m3)
Construction
6500000
3940000
Total Cost
6520000
4000000
Recurring Costs/year
Loss due to moisture
40000 (0.2%)
200000(1%)
Los due to rodents, insects, fungi and handling
40000(0.2%)
1600000(8%)
Operating costs
Electric Power
27500
80000
Fuel for dryer
37500
25000
Total
145000
1505000
(Source : “Research and development issues in grain post-harvest problems in Asia...”, FAO Corporate document depository. http://www.fao.org/wairdocs/x5002e/X5002e02.htm)
It can be seen that modern silos can be very cost effective in the long run.
9. Evaluation in Various means of Storage of grains
Currently used methods of Storage of grains can be evaluated on three major aspects
1. Operational, maintenance and quality aspects
2. Financial aspects
3. Management aspects
Operational and maintenance aspects
a) Ease of operation
b) Requirement of maintenance
c) Ease of monitoring and correction
d) Quality of the stored grains
Financial aspects
a) Initial investment
b) Operational costs
c) Break even point
Management aspects
a) Trained Personnel for operation of the storage
b) Scientific technics for control of insect, Pest, fungi and moisture
c) Efficient mechanised handling schemes in storage facility
d) Frequent inspection and monitoring of quality of grains and maintaining the records
e) Consolidation of the strorage requirements
f) Storage of multiple grains and multiple varieties of the same grain
g) Development of quality and operational standards
Modern Silos are best suited for bulk storage of grains in India due to ease of operation and better quality of the stored grains.
They retain the FAQ (Fair Average Quality) of the grains for a longer period. Silos require negligible maintenance compared to farm level techniques and godowns.
However initial investment is a major hurdle. Long term finance from banks and other financial institutions can encourage establishment of Silos.
Grains require constant monitoring especially against fungal attack. Methods to check and confirm the quality have to be established and implemented.
Trained personnel are required for establishing the quality.
Specified inspection intervals and suitable instruments are essential for assessment.
All procedures have to be standardised to avoid human errors.
Government subsidies are presently issued only for fertilizers, irrigation and pubilc distribution system in agriculture. Extending subsidies to storage will definitely improve the corporate investment in food grain storage facilities. Considering the huge investment required in modernising the traditional storage structures and long break even point, it will be difficult to lure the private enterpreners into this arena without government subsidies. Incentives can be given on the purchase of scientific storage structures.
Rebate can be given on storage charges for small and marginal farmers encouraging them to use the available facilities.
Incentives can be given for staggered procurement of food grains. During peak marketing season of food grains, there is a glut in the market as most pf the farmers are keen to sell their produce to Government for minimum support price. This creates a lot of problem for procurement agencies. Staggered procurement with higher price during off season will certainly encourage farmers to use modern storage technics.
Full-fleged infrastructure status with all applicable benefits should be extended to scientific storage structures as well.
Viability Gap Funding (VGF) can be extended to post harvest storage.
Setting up of a market information network to inform the farmers how they can fetch better price by storing their produce will certainly help.
Extend the services of the Primary Agriculture Co-operative Societies (PACS) to warehousing sector.
Build, Operate and Transfer schemes currently practiced in infrastructure development projects along with 5 year tax holidays given for power sector can attract many potential investors.
Lack of awareness is one of the major hindrances to bulk storages.
Consolidation of the produce in the village and storing in the co-operative storage facilities can be highly beneficial in long storage due to reduction in damage.
Storage was thought of as a public sector activity and was neglected for a few decades. This lead to the gradual decline of the storage facilities.
Improving research and development in modern storage structures.
Standardisation of scientific storage structure thereby reducing initial investment is recommended.
Targets can be set for financial institutions for lending to new warehousing facilities.
Encourage the registration of all warehouses.

10. Profit from Storing the food grains to sell during off season

Source: Agriwatch Wheat Monthly Report-31st Dec 2011
Existing and proposed electricity tariff for Domestic and Agricultural sectors in Punjab are given below
Sl. No.
Category of Consumers
Existing Tariff
Revised Tariff approved by the Commission
Increase in Tariff

Energy Rate (paise/kWh)
Energy Rate (paise/kWh)
Paisa/Unit
%age
A) Permanent Supply
1
Domestic

a)
Upto 100 units
311
348
37
11.90%
b)
101 to 300 units
452
488
36
7.96%
c)
Above 300 units
478
515
37
7.74%
2
Non-Residential Supply
519
556
37
7.13%
3
Public Lighting
510
547
37
7.25%
4
Agricultural Pumpsets
320 Ps/kWh or Rs. 273 /BHP/Month 357 Ps/kWh or Rs. 299 /BHP/Month
37
11.56%
Electricity Charges: 320ps/kWh for agricultural purposes
Typical fumigation, insecticides and labour charges for Sindh state in pakistan
District
No of godowns
Fumigation
Whole Godowns Fumigation cost Insecticide
Sealing & labour charge
Total expenditure

kg
Cost (Rs) liters Cost (Rs)
Cost (Rs)
(Rs.)
Sukkur
15
634
342360
45
31500
22500
396360
Ghotki
10
439
237060
30
21000
15000
273060
Khairpur
27
1439
777060
81
56700
40500
669420
NausheroFeroze
22
921
497340
68
47250
33750
578340
Nawabshah
45
2213
1195020
135
94500
67500
1357020
Larkana
22
1049
590560
66
46200
33000
1935360
Jaccobabad
18
794
428760
54
37800
27000
493560
Kashmore
10
243
131220
15
10500
7500
149220
Grand Total
169
7732
4199380
494
345450
246750
4791580
(Source : “Cost effectiveness of under-sheet and whole godown Fumigation of bagged wheat”,Akhlaq Ahmad, M. Anwar Arain, Rahila Nazli, Syed Anser Rizvi, Mubarik Ahmed and Farzana Ibrahim)
Cost of fumigation, insecticides and labour charges works out to Rs 0.75 per Ton of wheat.
Increase in realised price of wheat by selling in off season is about Rs 1100/Ton (About 10% of the cost). Overall expenditure on storing including expenditure on rental, dryers, insecticides, fumigation and labour charges works out to 3% of the wheat cost price for godown storage and 5% for silos. Losses due to storage in silos works out to 0.4%. Losses in storage in godowns can vary between 6 to 9%. Hence price gain of Silo storage will be 4.6% and a small loss of 0.5% is expected by storing in godowns for off season sale.
11. Transportation of food grains

Source :”“Grain Transport: Modal Trends and Infrastructure Implications”, John F. Frittelli, Specialist in Transportation Resources, Science and Industry Division, Congressional Research Service
Relative cost of transportation vary with distance for the three common means of transport Rail, Truck and Ship (Barge). A study conducted by John.F.Fritelli indicates the relative cost with distance. Truck transport is economical for short distances covering a few km to less than 200 km, Rail transport is better for 100 km to 700 km, and water transport economical for longer transportation. FCI moves about 25 million tonnes of food grain annually, through rail, road and water ways. The largest quantity is transported through the railways. During peak procurement season, arrivals far outnumber the quantity of railway wagons. The peak season for wheat starts from April and goes up to June-July. For rice, it starts around October and lasts up to December-January. Extensive modernisation of railway infrastructure, including railheads and rail yards in FCI godowns, to improve loading and unloading of grain is being implemented. Mechanization of grain handling has been implemented at major godowns. Computerization of Warehouses are being implemented in a phased manner. Use of GPS in trucks to avoid theft is being thought of, especially for Public Distribution system through ration shops.

Ensuring accessibility to food in a country of India 's size is a Herculean task. The food grains are transported from the surplus States to the deficit States by FCI.
The food grain surplus is mainly confined to the Northern States, transportation involves long distance throughout the country. Stock procured in the markets and purchase centres is first collected in the nearest depot and from there despatched to the recipient States within a limited time.
FCI moves about 250 Lakh tonnes of food grains over an average distance of 1500 Kms.
YEAR
Food Grain, Lakh Tonnes
Sugar, Lakh tonnes
Total
1996-1997
235.5
12
247.8
1997-1998
191.1
11
202.1
1998-1999
190.8
11
201.8
1999-2000
221.9
7
228.9
2000-2001
161.6
3
164.6
2001-2002
204.5
3
207.5
2002-2003
248.8
2
250.8
2003-2004
297.0
0.8
297.8
2004-2005
338.7
1.4
340.1
2005-2006
315.5
1.8
317.3
2006-2007
288.7
2.4
291.1
2007-2008
277.92
1.78
279.70
2008-2009
256.65
1.91
258.56
2009-2010
312.26
3.52
315.78
2010-2011
341.34
3.62
344.96
2011-2012
367.94
4.13
372.07
Source : Website of FCI
Regularly rice and wheat procured in the Northern States is moved to far flung corners of the country Imphal in Manipur or Kanyakumari in Tamilnadu and to the higher reaches of the Himalayas in the North. An average of 20,00,000 bags (50 Kg each) of foodgrains are transported every day from the producing States to the consuming areas, by rail, road, inland waterways etc. Thus effective planning and Management of the transport System is essential for efficiency and economy. FCI regularly moves food grain and sugar from the procuring Region to the concerning Region. FCI hires the truck operators for transportation along the roads.

12. Conclusion
Major expenditure for storage of food grains is from the capital investment which in turn is charged as rent to farmers. The profit from storage is mostly offset by the inflation. Hence farmers can only be encouraged to store in Co-operative Silos for off season sale by providing subsidies on rent and incentives on construction of bulk storage structures. Banks and financial institutions must be encouraged to provide long term loans to improve capital availability.
60-70% of the grains are currently stored in farm level with grain loss as high as 10% per season. This works out to a huge national loss. The cost of subsidies and incentives can be offset by reducing the current storage losses. This will also reduce the pressure on public warehouses of FCI, CWC and SWCs. Godowns of public warehouses also should be replaced by modern Silos in a phased manner. Silos have to be set up in regions of deficient storage facilities as well. Proper planning and investment in storage can reduce the grain loss drastically. Once the break even of the capital investment is achieved, the low running and maintenance costs of Silos can add to better revenues for the government. As the distance between surplus and deficient areas are very large, quick, economically viable and safe transportation of food grains is crucial. Constant effort to improve the efficiency and cost effectiveness of transport and handling systems are important.
Training of operating employees of warehouses and use of modern technology are to be given priority. Proper co-ordination between existing warehouses has to be established to improve the storage quantity and quality. Use of information technology and modern communication systems are expected to be handy. Standardisation of warehouse processes and grain quality are necessary for better utilisation and results. Market information network and consolidation of produce are helpful to get higher selling price for farm produce.
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