Chinese Lessons in Grain Storage
Prof. K.V. Thomas
Minister of State for Agriculture, Consumer Affairs, F&P.D


An infrastructure deficit affecting stable farm incomes, dominate of price-stability and grain security at times of grave metrological crises such as two failed consecutive monsoons is the lack of quality and quality of our grain storage infrastructure. The storage system developed under the public sector (FCI, CWC, SWC’s) and some private sector investment (eg. Adanis under public sector guarantees) caters to storing grain procured under minimum support price operations and issue through the public distribution system using a huge network of rail and road logistics.

In addition the storage holds the 14 million tonnes of grain buffer stocks activated on a crisis. In 2000, a high powered committee appointed by government estimated that an additional 12.7 million tones of ware housing was required in view of higher quantum of procurement owing to high overall productivity and increasing demand in the PDS. This would call for an additional investment about Rs.6000 crores Warehousing being a commercially feasible operation, the consensus was in favour of facilitating private sector investment as in airports and highways on a cost plus basis. The operational costs of FCI’s own warehousing were considered prohibitive for higher levels of investment. After ten years though a series of incentives such as relaxed FDI norms, income tax waivers technology import relaxations and potential under viability gap have been offered, considerable investment has been elusive and only a fraction of the target has fructified. The National Policy on storage handling and transport promised 20 years guarantees for Private Sector investment, but the schemes formulated by the food department on five and now seven years guarantees how low off take, since the return on investment is restricted and dealing with sector agencies in impossible for medium investors.

Meanwhile avoidable storage losses of procured grains continue. Though the FCI estimates a modest 0.4% as storage and 0.2% as transport losses, export studies show upto 10% losses from post harvest to consumption point. The National Institute of Grain Management, Hapur, computed 4.75% losses of Wheat in the procurement Mandis. In a Country where the lowest income quintiles of population suffer severe malnutrition, this is a shortfall we cannot afford. The quality of our existing storage infrastructure has also stagnated in terms of technology. Bag storage system involves labour intensive and time consuming, and quality compromising transport methods. None of our Bag stocked silos have temperature control or scientifically monitored fumigation. Rodent control looks fine in paper, but it is common for media to bring out stories where rodents emerge as significant beneficiaries of our well intentioned grains procured for human consumption. While our Asian neighbors have marched forward with relatively high science based management of grain storage, our technology could not keep pace. Managerial efficiency, science based innovative climate control technology, rodent control and logistics intelligence has not been adopted for efficiency gains.

It was in this back drop that I led a delegation of professionals from the public sector to study the Chinese experience in grain storage and management early this month. The visit took us to the national ministry, the Chinese State administration of grain, (SGA), the State Grain laboratories , the grain standards organization (all in Beijing) The State of the art commodity exchange in Dalian, Beilang Corporation handling logistics, Guamao grain storage engineering company and the provincial storage godowns of Shanghai and Guangzhou.

The experience has been instructive. Firstly China has moved in favour of public sector mediated operations in all the phases of farm gate to home gate grain movement. It procures and stores in the range of 100-140 million tones (official figures are not stated) but selectively bought from high productivity provinces. State prices are only available to provinces which excel in productivity and not as a rule. Due to high demand by double digit growth Chinese output of 0.52 Billion tones of Wheat rice and continue to be supplemented by import arrangements. China does not operate a comparable public distribution system except when huge calamities occur. Procured grain is cleaned, packed and marketed by about 3000 ‘private’ sector companies most of which have state support or party guidance at market dictated rates Grain prices are high at Rs.150-300 per kg in the retail markets we visited. Price control exists at procurement and wholesale points, but wage increments have been the supply side control than fiat methods. The Chinese storage capacity has witnessed a quantum jump under the State grain administration with State of the art multi modal (ship to track, Rail, Barge and ship to ship) automated grain transmission (Multi Modal Grain Terminals)as in Shanghai capable of handling 2000 tonnes per hour, to the highly mechanized provincial granary in Guangzhou with temperature controlled and fumigated 100,000 tonne small storage, China shows proof of its intensive infrastructure up gradations funded by high taxes World Bank assistance and trade surplus the investment ranges from farm based scientific storage instruction to state of the art standardization labs in Beijing. China has positioned a 1, 76,000 strong extension work force in its grain producing areas to educate farmers on storage practices. Granaries are effectively managed at near full capacity and storage costs are built into cost of grain at the consumers’ end.

The Chinese experience shows us that dedicated single window approach is inevitable in grain storage as in highways or airport development. It is high time that we learnt from these impressive Asian achievements and emulated the same. The food department has been asked to develop a blue print for augmenting scientific storage with the following pillars. Firstly, a dedicated special purpose vehicle (SPV) be floated with private sector participation, project financial capability and marketing skill. All the private sector guarantee schemes have to be repackaged upon consultation with industry and storage policy amended to recognize the fact that built storage has to have some redundancy and this does not be come later a point of attack from our audit system.

Storage capacity has a lag phase before full utilization and this has to be factored as a additional cost. The SPV can launch an international and national showcasing of investment opportunity and facilitate such projects. Prepare an up gradation plan for existing warehousing with state of the art gadgetry. It should develop globally competitive grain quality and standards organization in public sphere, if possible by building on existing infrastructure. Lastly but not least it has to developing quality grain storage professionals encompassing a range of skills in IT, agriculture, engineering and management. It is hoped that this new initiative, which I have proposed to be christened ‘Dhaanya Raksha Mission’ will be a success in the coming years. We cannot simply afford wait to act in this front.

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