India's New Warehouses

By: Udit Misra/Forbes India

Through a new system, the government plans to improve storage and help farmers get a better deal

One issue, other than corruption, that has troubled the UPA government since its first term, is inflation, especially food price inflation.

But most analysts believe that though India needs to improve its productivity, there are enough food grains in the country to feed the teeming millions. The real worry is about the supply chain or the lack of it, to be precise.

Estimates suggest that India wastes almost 20% to 25% of its food grains due to improper or inadequate storage. That is roughly 60 million tonnes of food grains each year, almost as much as what India actually stores in its official godowns. The degree of wastage is nearly double in the case of easily perishable commodities like fruits and vegetables.

Infographic: Hemal Sheth

It was in this context that the government instituted the Warehousing Development and Regulatory Authority (WDRA) in October last year. The idea was to improve the storage capacity in the country and also help producers and consumers get a better deal by cutting out the intermediaries and wastages. The 2011-12 Budget also recognised cold chains and post-harvest storage as an infrastructure sub-sector eligible for income tax relief.

The initial focus for the WDRA has been the agricultural sector. Thus, starting April 2011, the central government announced the Rural Godown Scheme to promote the construction of warehouses in the rural areas.

 The WDRA, on its part, has devised the system of Negotiable Warehouse Receipts, which will, in time, allow farmers to get the best price for their produce and help bring down prices of commodities by cutting out the arbitrage earned by middlemen (see graphic). At present, the scheme covers 40 agricultural commodities like cereals, pulses and spices.