Budget 2020 – The sprouting hope for warehousing industry

The term Warehouse is almost as old as agriculture. Although in recent, agriculture has seen few major transformation but the post harvest technology and storage is still struggling hard. Indian farmers incur loss of Rs 92,651 crore per year in post-harvest, the primary causes of which are poor storage and transportation facilities. Ironically, to improve the state of storage and transportation facilities for food crops to control the post harvest losses all it need is an investment of Rs 89,375 crore. This is according to a high-level Dalwai committee report, a figure lower than the annual post-harvest losses. About 65-70% of total foodgrains produced in the country are stored at farm level. There are estimates that substantial quantity of foodgrains (about 6.0% to 10% of total production) are damaged due to moisture, insects, rodents and fungi.

When Govt is trying hard to double the income of farmers by 2022 they can’t ignore the post harvest loss of Rs. 92,651 crore per year. Post harvest could be the real game changer for the Govt. and this cannot be done without having a proper plan for supply chain including the warehousing.

In the budget 2020, FM has made few announcements regarding the industry. The FM stressed on adding more warehouses under WDRA which instead will help to curb the distress selling of produce by farmers. But will it really work?

The WDRA (Warehousing Development and Regulation Act) – Although established with great concept but on ground it need lots of improvement. The warehousing industry is still following some 40-50 year old practices of storage and preservation. When the dynamics of market is getting transformed so fast how could warehousing industry will match the pace of demand?

The research on storage and warehousing is redundant. The organized warehouse constitutes only 10-15% of the total industry and even in that 70% of the share is of PSU and Govt. agencies. Theses agency works with the old system with little or no upgrade in the part of storage and preservation. These warehouses are scattered with very low access to market and farm/field. The scientific norms practiced for preservation and storage (pesticide residual limit restriction, moisture effect on quality and quantity, prophylactic and curative treatment method etc.) in these organized warehouses are questionable. Even WDRA manual also reads the old wives tale. 

Looking on to these factors it seems all announcements regarding warehouse is just a sizzling sensation of feeling the importance of warehouse. It’s a good sign indeed but not the remarkable one. Government needs to bridge the gap of demand and supply of the industry. Few things to think at the moment when we talk of WDRA are- 

1. Is WDRA implementation and enforcement, a right step without updating and mapping the industry concept and requirement?
2. Why the participation of farmers is still so low?
3. Since inception what WDRA has yielded?

 Modern warehouse is an integral part of supply chain management where apart from safe storage, goods can be processed to increase the value, reduces wastage and can timely address the requirement. This can be done by proper planning, implementation, adoption and integration  of  modern systems. Govt alongwith private players need to look upon developing the integrated system of supply chain. Some of the logistic parks with this concept are already in process. Concept of Free Trade Warehousing Zones (FTWZs, meant for global trading hubs in the international supply chain is remarkable. Further in this zone, Special Economic Zone (SEZ) Act 2005 and SEZ Rules 2006, has permitted 100 per cent FDI. The zone will boost the concept of supply chain and will act as an example of integrated concept of warehousing. But this all has just started and has long way to go. The government has to play big role to boost the sector. The effort by Govt to increase the participation of farmers by implementing the concept of WDRA is really appreciable. But not even 10% of the warehouses have registered with WDRA and even among them the participation of farmers is not remarkable. So, it clearly says there is some loophole in the concepts which need to be filled. The major reforms that Govt need to implement at this moment are-

1. Update warehouse with the latest research in the area of preservation and storage of foodgrains.
2. Restructure the industry by active participation of State agencies, Central agencies and private    players.
3. Map the warehouses.
4. Analyse the WDRA effect on ground and make necessary changes to get expected results.
5. Boost the Logistic parks concept, allocate land taking care of requirement of the the park including distance from airport, highway, port etc.
6. Analyse the demand by various industry right from automobile to e commerce to agriculture and so on.
7. Introduce the concept of movable and longtime preservation/ storage techniques like the silo bags.

There are a lot of things expected in this area. The most ambitious plan of Honorable PM “Make in India” cannot be fulfilled without building the pillar of supply chain. We need inventories to make or manufacture and these inventories need space from where it needs to be picked up. And where these inventories sit until the information moves them is WAREHOUSE.