food corporation of india (fci) srei infrastructure...

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Food Corporation of India (FCI)

SREI Infrastructure Finance Limited

FOOD CORPORATION OF INDIA Development of Silos on DBFOT at 11 locations pan India

Feasibility Report (Final) for Proposed Silo Complex at Kotkapura (KD-3)

Ministry of Consumer Affairs, Food and Public Distribution

FOOD CORPORATION OF INDIA

Preparation of Feasibility Report for Development of Silos on DBFOT at Kotkapura, Punjab

CONTENTS

1. INTRODUCTION 1-1

1.1. PROJECT BACKGROUND 1-1

1.2. OBJECTIVES OF THE STUDY 1-2

1.3. SCOPE OF CONSULTANCY 1-3 1.3.1. General TOR 1-3 1.3.2. Details of Scope of Services 1-3

1.4. CURRENT PROJECT STATUS 1-5

2. CURRENT POLICIES DIRECTIVES & AGREEMENTS 2-1

2.1. ORGANISATIONAL SETUP 2-1

2.2. STRUCTURE OF FOOD GRAIN MANAGEMENT 2-1 2.2.1. National Food Security System 2-1 2.2.2. Procurement of Food Grains for Central Pool 2-3

2.2.3. Storage Management 2-4 2.2.4. Capacity Augmentation Programmes 2-5

2.3. GAIN SUPPLY CHAIN & ROLE OF FCI 2-5 2.3.1. Existing role of FCI and Storage Capacity 2-6

2.4. REGULATORY FRAMEWORK 2-7 2.4.1. National Food Security Bill, 2013 2-7 2.4.2. Decentralized Procurement Scheme 2-8 2.4.3. High Level Committee Report, 2000 2-9

2.4.4. Private Entrepreneurs Guarantee (PEG) Scheme 2-9

3. EXISTING SUPPLY CHAIN OF STORAGE FACILITIES 3-1

3.1. CONVENTIONAL COVERED WAREHOUSE 3-1 3.1.1. Covered Area Plinth (CAP) 3-1



3.2. SILOS 3-2

3.3. CONVENTIONAL STORAGE vs. MODERN SILO STORAGE 3-2 3.3.1. Indian Scenario 3-2 3.3.2. Flat Warehouse Vs Modern Vertical Silos 3-2 3.3.3. Experience of Creating Silos in India 3-3 3.3.4. Road Map for future – Impetus on Bulk Handling and Transport 3-3

4. TECHNICAL FEASIBILITY 4-1

4.1. SITE APPRECIATION: PROPOSED SILO AT KOTKAPURA, PUNJAB 4-1 4.1.1. Location Appreciation 4-1 4.1.2. Connectivity Status 4-1 4.1.3. Existing Infrastructure 4-2

4.2. FACTORS INFLUENCING CAPACITY PLANNING 4-3 4.2.1. Factors 4-3 4.2.2. State Wise Production 4-5 4.2.3. Procurement of Wheat & Rice 4-7 4.2.4. State Wise Storage Capacity 4-7 4.2.5. Gap Analysis 4-8

4.3. SUPPLY CHAIN OF MODERN SILOS 4-9

4.4. CAPACITY PLANNING AND PROJECT FACILITY 4-11

4.5. PROJECT SCOPING 4-11

4.6. ASSOCIATED INFRASTRUCTURE 4-13 4.6.1. Internal Roads and Parking 4-13 4.6.2. Power Supply 4-13 4.6.3. Fire Detection and Fighting System: 4-14 4.6.4. Buildings and Sheds 4-14

4.7. RAILWAY SIDING 4-15 Location 4-15 Proposed Layout of Siding 4-15

Methodology for Train Operation 4-16

TECHNICAL FEASIBILITY 4-16

5. PROJECT FINANCIAL VIABILITY & SUSTAINABILITY 5-1

5.1. Rationale of Viability Analysis under VGF model on DBFOT basis under PPP 5-1

5.2. PROJECT COST 5-1 5.2.1. Factors affecting Project Cost 5-1



5.3. Consolidated Cost Summary of project 5-2

6. PROJECT FINANCIALS 6-1

6.1. Assumptions and Summary 6-1

6.2. Project Cost 6-3

6.3. Means of Finance 6-4

6.4. Revenues 6-4

6.5. Operational Expenses 6-5

6.6. Projected Profitability 6-6

6.7. DSCR Calculation 6-6

6.8. Cash Flows 7

6.9. Financial Returns 8

6.10. Sensitivity Analysis 6-9

6.11. Financial Viability and Sustainability 6-10



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Chapter 1

INTRODUCTION

1. INTRODUCTION

1.1. PROJECT BACKGROUND

The Food Corporation of India (FCI) was established on 14th January, 1965 under the Food

Corporations Act, 1964. FCI is a Public Sector Undertaking under the Department of Food &

Public Distribution, Ministry of Consumer Affairs, Food & Public Distribution, and Government

of India (GOI).

The Corporation is the main agency responsible for execution of food policies of the

Government of India. The functions of FCI primarily relate to the Purchase, Storage, Movement,

Distribution and Sale of food grains on behalf of the Government of India. It is also engaged in

the Handling, Storage and Distribution of Sugar in North Eastern States and Jammu & Kashmir

and two Union Territories Andaman & Nicobar Islands and Lakshadweep Island.

The main objectives of FCI are;

(a) Procurement of foodgrains from farmers at remunerative prices;

(b) Distribution of foodgrains to consumers through PDS, particularly the vulnerable sections

of society at affordable prices; and

(c) Maintenance of buffer stock of foodgrains for food security and price stability.

Food Corporation of India (FCI) is a Public Sector Undertaking under Department of Food &

Public Distribution, Ministry of Consumer Affairs, Food & Public Distribution. The general

superintendence, direction and management of the affairs and business of the Corporation vest

in the Board of Directors.

India’s grain production has steadily increased due to advances in technology, but post-harvest

loss is constant at 10%. Losses during storage, accounts for around 6% of the total losses as

proper storage facilities are not available. In India, food grains are stored using traditional

structures by small farmers. The surplus grains are stored with government agencies like: Food

Corporation of India (FCI), Central and State warehousing Corporations. The commonly used

storage method is Cover and Plinth (CAP) storage, which is economical but loss of grains is

inevitable. Very few scientific storage structures like silos are available with these agencies.

The government is taking initiatives now in building silos for long-term safe storage of grains

since we do not have enough storage capacity as of now. Drying of harvested grains to safe

moisture levels will reduce losses to a greater extend. However, very less literature is available

on behavior of grains after harvest for Indian climatic conditions. Therefore, there is a need for

research to develop management guidelines for safe storage and drying to ensure quality

management of stored grains.

The High Level Committee (HLC) was constituted by GoI on 20th August 2014 to evaluate the

possibility of restructuring of Food Corporation of India by identifying the hiccups in the

existing supply chain. The HLC submitted the final report on 19th Jan 2015 and recommended

key steps to achieve the desired results. One of the recommendations of HLC is that the FCI

should invite bids to convert its conventional go-downs to modern silos under PPP mode,

which will not only substantially reduces the overall wastage of the food grains, but also the



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private sector brings in investments in the system and mechanization / automation of

operations will induce efficiency in the whole supply chain of procurement, storage and

distribution.

Therefore, based on the above recommendations, Food Corporation of India (FCI) is envisaging

the Development of Steel Silos for Storage of wheat in consuming and distributing areas,

initially at eleven (11) pilot locations in six states (Punjab, Delhi, Bihar, Assam, Maharashtra

and Karnataka) of India on Design, Build, Finance, Operate and Transfer (the "DBFOT") basis

under Public Private Partnership (PPP) mode. The modern silos are envisaged to be developed

within the premises of selected FCI depots by utilizing the vacant land and land covered under

Cover and Plinth (CAP). The current strategies of FCI have been to phase out and dispense with

the methods CAP storage by next financial year to enhance quality of storage

Against this background, FCI has rightly steeped forward and strategized to increase / develop

safe wheat storage in view of large demand existing in the various parts of the country. In this

connection FCI engaged ‘Srei Infrastructure Finance Limited as Consultants’ through a

competitive bidding process for preparation of the ‘Feasibility report for 11 locations Pan India

and manage the bid process management to attract the private investment in the project

through a transparent bidding process.

This is a pilot assignment and there will more locations needing development of modern

storage facility for wheat and rice storage in near future. FCI is already envisaging -

comprehensively phasing out the CAP storage and replacing it with modern silos with bulk

loading and unloading facilities.

1.2. OBJECTIVES OF THE STUDY

In order to persuade and reassure the objectives & provisions for National Food Policy of GOI a

number of initiatives have been fast paced to enhance the quality of effective food storage

management with the discharge of following responsibilities:

i. Effective price support operations for safeguarding the interests of the Farmers;

ii. Distribution of food grains throughout the country for PDS and other Schemes of

Government of India; and

iii. Maintaining satisfactory level of buffer stocks of food grains to ensure National Food

Security.

The above objectives of the National Food Policy are being achieved by the Corporation

through its main operations of procurement, transportation, storage and distribution of food

grains. FCI has played a significant role in India's success in transforming the crisis

management oriented food security into a stable food security system, providing farmers with

remunerative prices through procurement of food grains, distribution of food grains

throughout the country for the Public Distribution System (PDS), particularly to vulnerable

sections of the society and also maintaining buffer stocks of food grains in order to ensure

national food security.

The Food Corporation of India (FCI) has been appointed as nodal agency for creation of

modern storage capacity through construction of Silos for food grains and as part of this

endeavor, FCI, decided to undertake construction of silos for storage of wheat at 11 locations

pan India as pilot projects through Public Private Partnership on Design, Build, Finance,

Operate and Transfer (DBFOT) basis.



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i. The basic objective is to prepare a feasibility study for determining the technical feasibility

and financial viability of the Project through a transparent bid process management

procedure.

ii. The consultants’ shall undertake feasibility study and prepare a Feasibility Report of the

Project for the purpose of firming up the FCI’s requirements in respect of development and

construction of the Project and enabling the prospective bidders to assess the FCI’s

requirements in a clear and predictable manner to ensure enhanced safety and level of

service for the silo and a superior operation and maintenance of the system with

operational efficiencies.

1.3. SCOPE OF CONSULTANCY

1.3.1. General TOR

i. The Consultant shall be guided in its assignment by the Model Concession Agreement and

RFP/RFQ.

ii. The Consultant shall be responsible for preparing the Schedules of the Concession

Agreement and for bringing out any special feature or requirement of the Project referred

to in the Concession Agreement.

iii. The Consultant shall assist FCI by furnishing clarifications as required for the Technical &

Financial appraisal and legal scrutiny of the Project and bid documents in the bid process

for selection of Concessionaire.

iv. The Consultant shall also participate in the pre-bid conference with the bidders of the

Project and assist the FCI in clarifying the technical aspects arising from the bid documents

including the Feasibility Report in the bid process for selection of Concessionaire.

v. The Consultant shall be responsible for modification and fine tuning of existing RFQ & RFP

documents for selection of Concessionaire, if required and responsible for the entire bid

process Management for selection of Concessionaire, including bid evaluation, issue of

LOA, signing of Concession agreement.

vi. The Consultant shall also engage the services of a Railway approved Consultant for

preparing the feasibility report for construction / extension of railway siding amenable for

bulk / bagged loading / unloading from/to special bulk wagon / conventional rail wagon

as per specifications of Indian Railway for each identified project.

1.3.2. Details of Scope of Services

i. Collection, compilation and analysis of available information provided by FCI.

ii. Consultant while preparing PFR will arrange for Feasibility Report from Railway Approved

Consultant for provision of railway siding connected to Indian Railway Network and

amenable for bulk and bagged loading/unloading from/to special bulk

wagon/conventional rail wagons for newly acquired land parcel and FCI’s owned godowns

where railway siding is available or otherwise.

iii. Assess financial viability of the Project;

iv. Development of revenue model;

v. Preparation of indicative BOQ and Rough Cost Estimates; and



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vi. Preparation of Schedules A, B, C, D and H of the Concession Agreement.

Details of services:

COMPILATION AND ANALYSIS OF DATA

vii. The Consultant shall, based on available information, compile and analyse the data

including technical, physical, economic, commercial and financial features of each of the

Project sites.

FINANCIAL VIABILITY

viii. The Feasibility Report shall include an assessment of the financial viability of the Project

with a view to estimating the likely IRR over a concession period of 15, 20 and 25 years

respectively. The Consultant shall calculate the NPV and EIRR for the Project., including

sensitivity analysis by identifying the most critical factors and determine their impact on

the EIRR, including varying project;

ix. Compute Costs and benefits, implementation period and combinations of these factors. The

Consultant shall also determine the likely requirement of Viability Gap Funding (VGF) in

accordance with the VGF Guidelines of the Government of India. While undertaking the

financial analysis and projecting the IRR, following assumptions shall be adopted:

a. Capital cost shall be adopted as per estimates of construction cost to which 25%

(twenty five per cent) shall be added for physical and price contingencies, interest

during construction, other financing costs etc.;

b. DE ratio may be assumed as 70:30; and

c. O&M costs may be assumed as per norms of the Authority;

x. The Consultant shall:

a. Calculate the NPV and EIRR for the Project. It will undertake sensitivity analysis by

identifying the most critical factors and determine their impact on the EIRR, including

varying project costs and benefits, implementation period and combinations of these

factors; and

b. Conduct a risk analysis (using the Monte Carlo method) by considering the possible

values for key variables based on records, and their occurrence probability.

c. If the IRR of the Project, based on the aforesaid calculations is less than 12% (twelve

per cent), an effort should be made to reduce the capital costs in consultation with the

Authority. This may be done either by omitting/ modifying some of the proposed

structures or by phasing them after a period of seven years or more, such that the IRR

reaches a minimum of 12% (twelve per cent).

REVENUE MODEL

xi. The Consultant shall identify and quantify all costs, expenses and revenues of the Project

and shall prepare cash-flow statements for a period of 10 years. With a view to examining

the feasibility of attracting private sector participation, the Consultant shall prepare the

Revenue Model which will indicate the possible capital structure, likely sources of

financing taking into account the viability gap funding or grant provided by the Central



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Government and the Project Authority, the costs of financing, the cash flow, debt service,

return on investment etc. (the “Revenue Model”).

COST ESTIMATES

xii. The Consultant shall work out indicative BOQ of various components and prepare rough

cost estimates of the location specific Project with a break up of cost for each component

separately. To the construction cost so arrived at, the Consultant may add 25% (twenty

five per cent) thereof as a lumpsum provision for physical and price contingencies, interest

during construction and other financing costs, pre-construction expenses etc.

xiii. Assistance in preparation of Schedules of the Concession Agreement

xiv. The Consultant shall assist FCI in the finalisation of the technical Schedules A, B, C, D and H

of the Concession Agreement and for bringing out any special feature or requirement of the

Project referred to in the Concession Agreement.

1.4. CURRENT PROJECT STATUS

The consultants’ have completed the site visits of all 11 locations along with the Railway

Empanelled Consultants (Ms/ Vogue, New Delhi covering Punjab and Delhi and E to E

Consultants, Bangalore covering Bihar, Assam, Maharashtra and Karnataka State locations.

The draft feasibility report has been prepared to assess the technical viability of selected

project site to accommodate the modern wheat steel silos of minimum targeted capacity of

25000 MT upwards with bulk loading/unloading facility through railway siding arrangement.

The step driven approach has been followed for finalization of draft feasibility report and

structured into following chapters

i. Brief Background of the Project

ii. Regulatory Framework

iii. Existing Supply Chain of Storage Facilities

iv. Comparison between Conventional Storage and Modern Silo Storage

v. Site Appreciation

vi. Importance of Railway siding in Modern Silos

vii. Gap Analysis

viii. Supply chain of Modern Silos

ix. Capacity Planning and Project Facility

x. Project Scoping

xi. Technical Feasibility

The steel silos main project components are long term storage Silos, Pre Storage Silos,

Shipping Silo, Loading & Unloading facilities, fumigation and Aeration, Bagging and De-



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bagging facilities, Cleaning facilities, Weighing facilities, Lab for testing, Miscellaneous Storages,

Admin Block and Utility Infrastructure

The Central Government will provide upto a maximum of 20% Viability Gap Funding (VGF)

support, if required, in addition to 20% VGF by State Government. However, such projects will

not be eligible for Capital Investment Subsidy and the Interest Subsidy.

The project shall be awarded to private developer by following two stage transparent bidding

process. The indicative project implementation structure under PPP mode is as follows:

Proposed Project Implementation Structure

Equity Debt

Develop and maintain the project till

the end of concession period and

collect user charges fixed by FCI

Bid Parameter: VGF/Upfront

Concession Premium

Concession rights on

land for creation of the

project facility

Food Corporation of India

Private Investor / SPV

THE PROJECT

Development of Wheat Silos at 11 Locations

Concessionaire Bank



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Chapter 2

CURRENT SETUP, DIRECTIVES AND AGREEMENTS

2. CURRENT POLICIES DIRECTIVES & AGREEMENTS

2.1. ORGANISATIONAL SETUP

The affairs of FCI are managed by a Board of Directors headed by Chairman & Managing

Director along with two Directors representing Ministry of Consumer Affairs, Food and Public

Distribution, one Director from Ministry of Agriculture & Co-operation, one ex-officio

(Managing Director of Central Warehousing Corporation) and two non-official Directors.

All the Directors are appointed by the Central Government. As against the provisions of the Act

of having 12 Directors in the Board, the present FCI Board consists of only seven Directors. Its

functions are managed through country-wide network of offices with headquarters at New

Delhi with five Zonal offices, 24 Regional offices, 168 District offices and one Port office at

Adipur (Kutch), Gujarat.

2.2. STRUCTURE OF FOOD GRAIN MANAGEMENT

2.2.1. National Food Security System

Food security as a concept originated only in the mid-1970s, in the discussions of International

food problems at a time of global food crisis. The initial focus of attention was primarily on

food supply problems - in assuring availability and to some degree the price stability of basic

foodstuffs at the international and national level. That supply side, international and

institutional set of concerns reflected the changing organization of the global food economy

that had precipitated the crisis. A process of international negotiation followed, leading to the

World Food Conference of 1974, and a new set of institutional arrangements covering

information, resources for promoting food security and forums for dialogue on policy issues.

The issues of famine, hunger and food crisis were also being extensively examined, following

the events of the mid-1970s. The outcome was a redefinition of food security, which

recognized that the behaviour of potentially vulnerable and affected people was a critical

aspect.

A third, perhaps crucially important, factor in modifying views of food security was the

evidence that the technical successes of the Green Revolution did not automatically and rapidly

lead to dramatic reductions in poverty and levels of malnutrition.

The initial focus, reflecting the global concerns of 1974, was on the volume and stability of food

supplies. Food security was defined in the 1974 World Food Summit as:

“Availability at all times of adequate world food supplies of basic foodstuffs to sustain a steady

expansion of food consumption and to offset fluctuations in production and prices”.

In 1983, FAO expanded its concept to include securing access by vulnerable people to available

supplies, implying that attention should be balanced between the demand and supply side of

the food security equation:

“Ensuring that all people at all times have both physical and economic access to the basic food

that they need”.



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In 1986, the World Bank report, Poverty and Hunger, focused on the temporal dynamics of

food insecurity. It introduced the widely accepted distinction between chronic food insecurity,

associated with problems of continuing or structural poverty and low incomes, and transitory

food insecurity, which involved periods of intensified pressure caused by natural disasters,

economic collapse or conflict. This concept of food security is further elaborated in terms of:

“Access of all people at all times to enough food for an active, healthy life”.

By the mid-1990s food security was recognized as a significant concern, spanning a spectrum

from the individual to the global level. However, access now involved sufficient food, indicating

continuing concern with protein-energy malnutrition. But the definition was broadened to

incorporate food safety and also nutritional balance, reflecting concerns about food

composition and minor nutrient requirements for an active and healthy life. Food preferences,

socially or culturally determined, now became a consideration.

The 1996 World Food Summit adopted a still more complex definition:

“Food security, at the individual, household, national, regional and global levels [is

achieved] when all people, at all times, have physical and economic access to sufficient,

safe and nutritious food to meet their dietary needs and food preferences for an active and

healthy life”.

This definition is again refined in The State of Food Insecurity in the World 2001:

“Food security [is] a situation that exists when all people, at all times, have physical, social and

economic access to sufficient, safe and nutritious food that meets their dietary needs and food

preferences for an active and healthy life”.

Essentially, food security can be described as a phenomenon relating to individuals. It is the

nutritional status of the individual household member that is the ultimate focus. So, Food

security exists when all people, at all times, have physical, social and economic access to

sufficient, safe and nutritious food which meets their dietary needs and food preferences for an

active and healthy life. Household food security is the application of this concept to the family

level, with individuals within households as the focus of concern, and Food insecurity exists

when people do not have adequate physical, social or economic access to food as defined

above.

The amount and quality of food available globally, nationally and locally can be affected

temporarily or long-term by many factors including climate, disasters, war, civil unrest,

population size and growth, agricultural practices, environment, social status and trade.

Affordable age, status, gender, income, geographic location and ethnicity all affect a person's

ability to access and afford sufficient food. When there is a shortage of food the rich are

unlikely to go hungry but their demand for food increases the price and makes it harder for

poor people to obtain food

A ‘National Food Security System of the Government of India’ is operated under an

operational framework involving procurement of food grains through price support operations

by fixing Minimum Support Price (MSP), maintenance of buffer stocks, food subsidy regime,

allocations and distribution of food grains to weaker and vulnerable sections of society through

TPDS. Timely and efficient procurement and building up of adequate buffer stocks in the

Central Pool, through efficient storage and movement of food grains are central to the food

security strategy of the GOI. Storage Management and movement of food grains, therefore,

are important links in the whole system from procurement to distribution of food grains to the

consumers.



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THE NATIONAL

FOOD SECURITY

ACT, 2013

An Act to provide for food and nutritional security in human life cycle

approach, by ensuring access to adequate quantity of quality food at

affordable prices to people to live a life with dignity and for matters

connected therewith or incidental thereto

Enacted by, The Parliament of India

Procurement of food grains for the Central Pool is carried out by FCI, State Government

Agencies (SGAs) and Private Rice Millers. In addition, 10 states/UT’s which are presently under

De-centralised Procurement (DCP) scheme also procure food grains for the Central Pool but

directly store and distribute under TPDS and Other Welfare Schemes (OWS) based on the

allocation made by the GOI. Any surplus stock over their requirement is taken over by FCI and

in case of any shortfall in procurement against allocation made by the GOI, FCI meets the deficit

out of the Central Pool.

The procured food grains are taken over into the Central Pool by FCI, only Government agency

entrusted with movement activities, from SGAs and private rice millers and are moved from

the procuring States to the consuming States for distribution to the consumers and for creation

of buffer stock in various States. Food grains of the Central Pool are stored by FCI in both its

owned capacity and hired godowns in different parts of the country. The function of

distribution of food grains to the consumers is carried out by the State Governments through

TPDS and OWS. The food grains are also disposed of by FCI and State Governments based on

allocation of the GOI through sale under Open Market Sales Scheme (OMSS).

2.2.2. Procurement of Food Grains for Central Pool

Under the existing procurement policy of the GOI, food grains for the Central Pool are procured

by various agencies such as FCI, State Government Agencies (SGAs) and private rice millers.

Procurement of wheat and paddy for the Central Pool is carried out on open ended basis at

MSP fixed by the GOI. In addition, rice is also procured by FCI from private rice millers under

statutory levy scheme through price support mechanism.

Procurement of rice for the Central Pool is undertaken through two routes, namely, Custom

Milled Rice (CMR) and levy rice. Rice obtained out of paddy procured for the Central Pool by

SGAs under price support system is known as CMR. Rice purchased by FCI from private rice

millers against paddy procured by them at MSP under levy orders issued by respective State

Governments at state-wise levy prices fixed by the GOI is known as levy rice.

Paddy and wheat procured by the State Governments falling under DCP scheme are also part of

the Central Pool. Under this scheme, the DCP states procure, store and directly distribute food

grains including levy rice towards TPDS and OWS. Any surplus stock over their requirements is

taken over by FCI for the Central Pool and in case, of any shortfall in procurement against

allocation made by the GOI for distribution to TPDS, FCI meets the deficit out of the Central

Pool.

The production, mandi arrival and procurement of food grains (wheat and rice) between the

period 2006-07 & 2011-12 are presented in Table 2.1.

Table 1.1 PRODUCTION, MANDI ARRIVAL AND PROCUEMENT OF WHEAT (lakh metric tonne)



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Crop Year Production Mandi arrival

Procurement % Mandi arrival to

production FCI

State Govt. Agencies Total Non-DCP-

States DCP-States

2006-07 758.10 137.01 13.43 78.39 0.49 92.31 18 2007-08 785.70 154.30 15.41 89.88 5.99 11l.28 20 2008-09 806.80 244.13 52.88 126.29 47.72 226.89 30 2009-10 808.00 268.58 47.88 148.78 57.16 253.82 33 2010-11 868.74 259.47 34.19 157.18 33.76 225.13 30 2011-12 939.03 324.62 39.74 192.87 50.74 283.35 35 2012-13 935.10 280.24 49.92 244.3 87.25 381.47 30 2013-14 959.10 338.98 38.95 147.78 64.19 250.92 35

Source:FCI, indexmundi.com, meclai.com

2.2.3. Storage Management

The primary policy objective of the GOI, obviously, is to ensure food security in the country

through timely and efficient procurement and distribution of food grains. This involves

procurement of food grains, building up and maintenance of food stocks, storage, movement

and delivery of food grains to distributing agencies. Storage management is an important link

in the whole system from procurement to distribution of food grains to the consumers.

Under the existing operational framework for ensuring food security in the country, FCI is the

main Government agency entrusted with management of food grains in the Central Pool held

by SGAs and DCP states. FCI is also responsible for storage of the Central Pool stock by taking

over the food grains procured by SGAs; whereas the food grains procured by DCP States are

stored and directly distributed by them under TPDS and OWS.

FCI, however, has to resort to hire space from various agencies such as CWC, SWCs, SGAs and

private parties as its own storage capacity is sometimes insufficient to accommodate the

Central Pool stock of food grains. The stock of food grains is normally stored in covered

godowns, silos and uncovered godowns called Covered and Plinth (CAP) as presented in Table

2.2.

Table 2.2 AVAILABILITY OF STORAGE CAPACITIES

As on 31 March FCI (Owned covered

and CAP) CWC SWCs Total Storage Capacity

2007 152.33 102.20 191.86 446.39 2008 151.54 98.78 187.32 437.64 2009 151.40 105.25 196.82 453.47 2010 154.77 105.98 209.26 470.01 2011 156.07 102.47 211.27 469.81 2012 156.40 100.85 234.61 491.86 2013 156.40 108.02 250.93 515.35 2014 156.40 104.94 266.96 528.30

Source: FCI, CWC, State WC’s

The total storage capacity for the central pool available with FCI inclusive of the capacity hired

from various sources (State Government, SWC, SWC and Private Sector) ranged (Table 2.3)

between 252 LMT in 2007 and 369 LMT in year 2014.

Table 2.3 STORAGE CAPACITY AVIALABLE WITH FCI (includes hired)



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Financial year end

Covered CAP Total

Owned Hired Total Owned Hired Total 2007 129.41 93.42 222.83 22.92 6.32 29.24 252.07 2008 129.48 87.13 216.61 22.06 0.27 22.33 238.94 2009 129.67 101.24 230.91 21.73 0.15 21.88 252.79 2010 129.69 128.90 258.59 25.08 4.69 29.77 288.36 2011 129.91 154.59 284.50 26.16 5.44 31.60 316.10 2012 130.03 172.13 302.16 26.37 7.51 33.88 336.04

2.2.4. Capacity Augmentation Programmes

The most critical infrastructure in context of capacity augmentation is storage. There have

been several initiatives by FCI to resolve the storage constraints. FCI recognises the facts that

construction of safe storage facilities will ultimately become valuable assets. Therefore, FCI has

made long term strategic planning with a flexible approach to plan infrastructure and manage

them with changing scenarios and secure the benefits of value appreciation with the passage of

time. In this regard role of private sector will be important in synergising the development

process for building the storage infrastructure and capacity for the nation.

Various augmentation programmes of FCI are;

i. Construction of owned storage in XI Five year Plan including schemes for North East.

ii. Implementation of National Policy on Handling, Storage and Transportation of Food grains.

iii. Private Entrepreneurs Guarantee (PEG) Scheme, 2008

FCI is a step closer in building state-of-the-art grain storage and movement facilities through

its public-private participation projects to add about 2 million tonne capacity Silos by 2014-15.

This is one of the most significant projects in the food sector and a step towards modernization

of food grain storage logistics aimed at bringing together the expertise with private and public

sector on key design, structure and financing of the project and be regarded as a major

endeavour by the FCI and Ministry of Consumer Affairs, Food and Public Distribution towards

modernizing the country’s food grain storage and movement.

It is challenge and responsibility to ensure the annual availability of an estimated 62 million

tonne food grains for distribution under the Public Distribution System (PDS), therefore, new

paradigm of food security would necessitate extensive and sizeable augmentation of the

country’s grain storage capacity. The current initiative will be a PPP initiative on DBFOT basis

for 11 pilot locations in the States of Maharashtra, Punjab, Assam & Bihar. This will create a

vast opportunity for private investors representing Silo equipment suppliers and

manufacturers and financial institutions, Silo operators, warehousing and logistics companies.

All these efforts will be beneficial for creating integrated modern warehousing capacities in the

country. For meeting the capital expenditure on construction of silos, the private

entrepreneurs would be eligible for Viability Gap Funding (VGF) under the existing VGF

scheme which allows grants of up to 20% of capital cost on the basis of competitive bidding.

The FCI would provide an additional VGF to enhance the viability. For storage of wheat in these

silos, the developer will be entitled to receive a recurring service charge provided he meets the

required performance and maintenance standards.

2.3. GAIN SUPPLY CHAIN & ROLE OF FCI

Grain supply chain efficiency depends primarily on two things: (a) what is the overall volume

(scale) of grain to be procured, stored and moved; and (b) at each segment of the supply chain,



2-6 | P a g e

what technology is adopted to handle grain so that per unit cost is reduced. Normally, if the

scale of operations is large, it would be desirable to introduce bulk handling facilities with

better mechanized system at every level so that one can save on not only the time to turn

around, but also give some relief to labour from carrying lakhs of bags on their backs.

If India implements the NFSA, 2013 in its current envisaged form, it would require

procurement and distribution of about 61 MMT of grains annually as flow variables. Strategic

reserves are fungible and they are accounted for in the buffer stocking norm for each quarter.

Currently, the highest buffer stocking norm (including strategic reserves) is 31.9 MMT. Keeping

in mind the needs of NFSA, GoI has recently approved new buffer norm of 41.12 MMT, but

revised downwards the buffer norm of January 1st from the current level of 25 MMT to 21.41

MMT. Efficiency of the entire logistics of grain-chain depends upon how fast one can move

around grains from surplus to consuming areas. And this necessitates bulk handling systems in

grain supply chain.

The procurement of grains has hovered around 63 MMT and off-take from TPDS has remained

around 60 MMT, and the long distance movement of grains has been around 40 MMT. Almost

70 percent of this long distance movement originates in the north-west, indicating that surplus

is concentrated in the north-west.

2.3.1. Existing role of FCI and Storage Capacity

Existing storage capacity with FCI and State agencies for Central Pool stocks as on 01.01.2015

was 72.49 MMT, of which 15.71 MMT was in Cover and Plinth (CAP).

Break-up of FCI’s cost as per Budgetary Estimates 2014-15 are summarised below:

Particulars Wheat %age Fixed by Pooled Cost of gran

1353.25 68% GoI

Proc. Incidentals 348.50 17% GoI State Govt. Acquisition Cost 1701.75 85% Freight 113.85 6% Railways/ Open tender Handling 57.25 3% Wage settlement/min wage act Storage 36.57 2% GoI open tender Interest 58.32 3% Consortium of banks Losses 2.66 0% Operational losses Admin Overheads 23.30 1% GoI as per DPE guidelines Distribution costs 291.95 15% Economic costs 1993.70 100% Average sales realization

539.57 27% GoI/tender

Subsidy

Table 2.4 STORAGE CAPACITY SCENE IN INDIA (COVERED VS. CAP) - LAKH TONNES

Storage Capacity with FCI Covered Owned 130.09 Hired 225.38

CAP Owned 26.38 Hired 4.42



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Total Owned (41%) 156.47 Total Hired (59%) 229.80

Total (FCI) 386.27

Storage Capacity with State Agencies (excludes capacity allotted

to FCI)

Covered 219.86 CAP 150.41

Total (State) 370.27

Grand Total 756.54

The total hired capacity with FCI (Table 2.4) is about 60% i.e. 260 lakh tonnes. CWC, SWC &

Private hired capacity are about 9%, 24% & 27% respectively.

The shortages in food grains can be classified under three heads, namely, storage loss, transit

loss and non-issuable / damaged food grains. As per FCI’s data, the third category is negligible.

The factors contributing to the storage loss are:

(i) Loss in moisture

(ii) Prolonged storage

(iii) Poor texture of gunnies, accentuated by use of iron hooks

(iv) Improper storage practices

The factors contributing to the transit loss are:

(i) Multiple handling

(ii) Poor texture of gunnies, accentuated by use of iron hooks

(iii) Poor quality wagons

(iv) En route pilferages

(v) Inadequate security at rail points, especially during night working and BG/MG

transhipment

2.4. REGULATORY FRAMEWORK

2.4.1. National Food Security Bill, 2013

Storage Loss, 370.73

Transit Loss , 406.61

0

100

200

300

400

500

600

700

800

900

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Years

Axi

s Ti

tle

Fig 2.1 TRANSIT & STORAGE LOSS



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The National Food Security Bill, 2013 passed by the parliament on late Monday gives right to

subsidised food grain to 67 percent of India`s 1.2 billion people and provides for penalty for

non-compliance by public servants. The bill`s salient features include:

i. Seventy five percent of rural and 50 percent of the urban population entitled to five kg

foodgrains per month at Rs 3, Rs 2, Re 1 per kg for rice, wheat and coarse grains,

respectively.

ii. The work of identification of eligible households has been left to the states.

iii. Pregnant women and lactating mothers entitled to nutritious meals and maternity benefit

of at least Rs 6,000 for six months.

iv. The central government will provide funds to states in case of short supply of foodgrain.

v. The current foodgrains allocation of the states will be protected by the central government.

vi. The state governments will provide food security allowance to the beneficiaries in case of

non-supply of foodgrains.

vii. Public distribution system to be reformed.

viii. The eldest woman in the household, 18 years or above, will be the head of the household

for the issue of the ration card.

ix. There will be state and district level redress mechanisms

2.4.2. Decentralized Procurement Scheme

The scheme of Decentralized Procurement of foodgrains was introduced by the Government in

1997-98 with a view to enhancing the efficiency of procurement and PDS and encouraging

local procurement to the maximum extent thereby extending the benefits of MSP to local

farmers as well as to save on transit costs. This also enables procurement of foodgrains more

suited to the local taste.

Under this scheme, the State Government itself undertakes direct purchase of paddy and wheat

and procurement of levy rice on behalf of Government of India, and also stores and distributes

these foodgrains under TPDS and other welfare schemes. The Central Government undertakes

to meet the entire expenditure incurred by the State Governments on the procurement

operations as per the approved costing. The Central Government also monitors the quality of

foodgrains procured under the scheme and reviews the arrangements made to ensure that the

procurement operations are carried on smoothly.

At present following States are under DCP system:

S.N State/UT DCP adopted for 1. A&N Islands Rice 2. Bihar Rice/Wheat 3. Chhattisgarh Rice/Wheat 4. Gujarat Wheat 5. Karnataka Rice 6. Kerala Rice 7. Madhya Pradesh Rice/Wheat 8. Odisha Rice 9. Tamil Nadu Rice

10. Uttarakhand Rice/Wheat 11. West Bengal Rice/Wheat 12. Punjab (for NFSA obligations) Wheat



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13. Rajasthan ( in Alwar District) Wheat 14. Andhra Pradesh (6 Districts) Rice 15. Telangana (9 Districts) Rice

2.4.3. High Level Committee Report, 2000

The Union Ministry of Consumer Affairs, Food & Public Distribution constituted this High Level

Committee for formulating a Long-term Grain Policy for the country on the 17th of November

2000. The Terms of Reference (see Annexure 1) assigned to it required examination of the

following areas:

i. Minimum Support Prices (MSP) and Price Support Operations

ii. The Role of the Food Corporation of India (FCI)

iii. Functioning of the Public Distribution System (PDS)

iv. Policies regarding buffer stocks, open market sales and foreign trade

v. Allocation of grain for Rural Development and other Welfare programme

These cover almost all aspects of the present system of national food security, under which:

- The Union Government announces MSPs at which it guarantees open-ended purchase of

whatever grain is offered by farmers.

- The Centre also has responsibility for maintaining buffer stocks and for the allocation and

pricing of grain supplied to States for sale through the PDS.

- The actual implementation of the procurement, storage and distribution functions that

follow from these decisions of the Central Government rests on the FCI, a Central public

sector undertaking, which is also required to maintain the food security buffer stocks and

to carry out price stabilisation operations through open market sales.

- It is the responsibility of State governments to maintain and provision the network of retail

fair price shops required to reach the PDS to consumers and to implement any other

welfare programmes, such as mid-day meal schemes in schools and food-for-work

schemes for rural development, through which food grains may be distributed to those in

need.

2.4.4. Private Entrepreneurs Guarantee (PEG) Scheme

Higher MSP coupled with better outreach lead to higher procurement in the past few years. As

a result of higher procurement of foodgrains, the Central Pool stock had increased from 196.38

lakh MT as on 1.4.2008 to a peak level 823.17 lakh MT as on 1.6.2012. Hence, necessity was

felt to augment the storage capacity for foodgrains. The Department is implementing a scheme,

namely Private Entrepreneurs Guarantee (PEG) Scheme, for augmenting the storage capacity

in the form of covered godowns and to reduce the dependence on CAP storage.

i. Under the PEG Scheme, which was launched in 2008, godowns are constructed in PPP

mode through private parties, as well as various agencies in Public Sector for guaranteed

hiring by FCI.

ii. Guarantee period for private parties is 10 years whereas for Public Sector agencies it is 9

years. In case of private parties, state wise tenders are invited by designated nodal agency

under a 2 bid system. At the technical bid stage, sites are inspected and bids in respect of



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only those sites which are found suitable, are processed further. Tenders are allotted to the

lowest bidders. Non railway siding based godowns are to be constructed in one year

whereas godowns with railway siding are allowed two years construction period. This

period can be extended by one year at the request of the investor. After completion of the

godown, final inspection is carried by a joint committee of FCI and the Nodal agency and

godowns completed in all respects and as per specifications are taken over on guarantee

basis.

iii. Locations for construction of godowns were identified by the FCI on the basis of

recommendations of State Level Committees (SLCs) to meet the storage gaps. For

consuming areas, the storage gap is assessed on the basis of 4 months requirement of PDS

and OWS while for procuring states the storage gap has been assessed based on the highest

stock levels in the last three years, and keeping in view the potential of procurement.

iv. Accordingly, approximately 200 lakh MT capacity creation was planned with construction

of godowns at various locations in 19 states. As on 30.06.2014, capacity of 153.16 lakh MT

has been sanctioned for construction and 120.30 lakh MT has been completed.

v. The Government has also approved construction of modern storage facilities in the form of

silos of 20 lakh MT capacity within the overall approved capacity for PEG Scheme. Each silo

will have capacity of 25,000 or 50,000 MT. FCI has identified the locations of silos in 10

States. Construction is being planned in the PPP in both Viability Gap Funding (VGF) and

non-VGF modes.



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Chapter 3

EXISTING SUPPLY CHAIN OF STORAGE FACILITIES

3. EXISTING SUPPLY CHAIN OF STORAGE FACILITIES

3.1. CONVENTIONAL COVERED WAREHOUSE

The conventional covered warehouses are the traditional godowns developed with RCC type

columns and roof structures. Godowns are constructed with super structure of brick masonry

in cement mortar. It has generally brick or stone masonry for foundation. Godown units are

generally constructed in modules of capacity 5000 MT. The Food Corporation of India (FCI) has

developed guidelines for construction of godowns suitable for the storage of food grains.

Covered godowns can store wheat in bagged as well as bulk form. However, FCI stores wheat

mainly in godowns in bagged form only, in the absence of mechanical handling required for

bulk storage.

Shelf Life: The shelf life of grains in godowns depends on grain management and preservation

and therefore there is no fixed period. In general the grain can be kept safely in godowns until

16- 18 months.

Land Requirements: Warehouses are horizontal structures which require significant land area.

It is learnt that a 50,000 MT warehouse would require an area of approximately 18-20 acres.

Ease of Construction & Maintenance: FCI has standardised the construction and maintenance

guidelines for godowns and it is understood that godowns can be easily built in a short

timeframe of 3-4 months as materials are available locally and the technical know-how is also

available.

Multiple Commodity Storage: As the warehouses have bagged storage therefore it can

accommodate multi commodities. Primarily FCI and other procurement agencies store wheat

and rice in the existing godowns together.

3.1.1. Covered Area Plinth (CAP)

CAP is a scientific yet temporary storage technique with guided specifications of concrete

plinth, dun-age and tarpaulin. As CAP storage is an open storage the grains need to be

essentially bagged.

Shelf Life: Similar to godowns the shelf life of grains in CAP storage is dependent on grain

management and preservation and therefore there is no fixed period. In general, the standard

time for which the grain can be kept completely safe in CAP storage is about 6 months.

Storage Techniques

Land Requirements: CAP storages are horizontal structures which require sizeable land area.

Since there is no peripheral structure, the land requirement is lesser than that of a warehouse.

Ease of Construction & Maintenance: The FCI has standardised the construction and

maintenance guidelines for CAP and it is understood that a CAP is easily built in short

timeframe of a few days as materials are available locally and the technical knowhow is also

available.



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Multiple Commodity Storage: As the CAP storages are bagged storage therefore they can

accommodate multi commodities.

3.2. SILOS

Silos are primarily the large tank type structures either made of steel or concrete for storage of

food grains or other materials in monitored atmosphere. As silos are tank type high vertical

structures, wheat or other materials are stored in bulk form only. Silo requires mechanized

handling for loading and unloading of material. At port locations which are more prone to

corrosion, concrete silos are constructed while for inland locations, steel silos are better as

they are quite cost effective as compared to concrete silos.

Shelf Life: In silos, there are many aspects of grain management, the management is

mechanical rather than manual. In general, the grain may be kept safely in silos for a period of

2 years.

Land Requirements: Silo is basically a vertical storage option as compared to godowns or CAP

which are horizontal type storages. Hence, silos save a lot of land compared to warehouses. For

a 50,000 MT silo, 7 acres land is required.

Ease of Construction & Maintenance: The construction of steel silos can be done within 10

months including the lead time of importing the steel structures. The erection time is about 2-3

months. Steel silos are quite easy to maintain.

Multiple Commodity Storage: As silos are meant for bulk storage, two commodities cannot be

kept within the same silo bin or even in different bins as they have the same mechanical

handling equipment.

3.3. CONVENTIONAL STORAGE vs. MODERN SILO STORAGE

Food Security cannot be complete without addressing the rudiments on scientific storage of

Grains. According to a report published by UN, world loses are about one third of the food

produced. This amounts to a staggering 1.3 billion tons annually. India loses about 10% of its

grain and oilseeds annually. ‘Harvest to Household’ losses may actually be more than what a

country like Australia Exports.

The current covered ware house capacity available with FCI is 33.63 Million Tons. With

procurement exceeding 63.68 Million Tons, adequate storage actually falls short. A large

quantity of Wheat is still lying in open under CAP Storage waiting to be evacuated, through it

has been phased out by FCI.

Private sector investment in Agriculture in our country declined from around 12% in 1999-

2000 to less than 6% currently. It is in this back drop we would examine the opportunities and

challenges of improving Post-Harvest infrastructure in our country.

3.3.1. Indian Scenario

India produces about 250 Million Tons of Food Grain and Wheat production has skyrocketed to

95 million tons on the strength of Govt. buying. Corn production has gone up to 21 million tons.

States like Karnataka, Bihar have done exceedingly well in this regard.

Warehousing capacity in India has not kept pace with Production/Procurement increase.

Storage Gap of 35 Million Tons is estimated for 12th Plan period.

3.3.2. Flat Warehouse Vs Modern Vertical Silos



3-3 | P a g e

In India we have been debating for decades whether Flat warehouses are good for our country

or we need to modernise by having vertical Silos. The most important aspect would be to

understand and study the International Best Practices as existing globally.

USA: USA has more than 310 Million Ton Silo storage capacity. On farm / Silo capacity is almost

equal to off farm capacity, adopting the ideal ‘Hub and Spoke System’. On farm storage helps

farmer to store Grain at the site at harvest time and move to off farm. As compared to this in

Punjab/Haryana, scene is chaotic at harvest time.

Canada: Canadian Wheat Board is the nodal agency for Wheat. Major food grains holdings of

CWB are at farm level and grain terminals same as ‘Hub and Spoke System’.

China: China procures, handles, stores & transports its food grains viz., Wheat, Paddy, Rice &

Corn in Bulk only. Bags are used at the final stage i.e. while selling to consumer. State

intervention in China is quite strong. Just, like India, they have planned remunerative prices for

farmers and low prices to consumers. The CAP storage in China is nil. Transition from CAP to

Flat Warehouse happened in 1998 when China realized the quantum of wastage in CAP.

Punjab/Haryana stores a lot of Grains in CAP. China stores grains in Bulk in their warehouses

also. Transition from Warehouse to Silo came when China realized construction of Warehouse

was more expensive than Silos.

3.3.3. Experience of Creating Silos in India

The pilot projects were built on BOO basis and FCI was the Nodal Agency. This was the first

experience for FCI. The quality of Wheat stocks even after 5 years has been excellent. Transit

loss is below 0.25%. Fumigation and insect control is excellent with zero residues in the Grain.

Farmers are benefitted as they get accurate weighments’ and are free in 1 hour.

Rake loading is completed within 3/4 hours as against 8/9 hours in conventional bag loading.

Similarly unloading is done within 3/4 hours as opposed to 8/9 hours in Bags unloading.

3.3.4. Road Map for future – Impetus on Bulk Handling and Transport

Labour costs in our country are going through the roof. Apart from costs arranging labour is

becoming a nightmare. Cost of Jute bags has become prohibitive. With Indian Railways

stretched for funds and new rolling stock difficult to procure.

The need of the hour is to improve capacity utilization. Freight Income for Railways is around

6700 Crore. Grain accounts for 8.3% of freight revenue, if we reduce 50% turnaround time in

loading/ unloading of wagons the savings for the Nation would be humongous. Preservation of

Grain is much better in Silos apart from lower land requirement (1/3rd of Flat Godowns).

Our farmers use Sun-Drying method for corn which has disastrous results. Invariably our corn

suffers Aflatoxin issues due to improper drying and gets rejected. Huge value destruction takes

place. Proper Driers attached to Silos are the basic needs to address this issue. If we, analyse

end to end solution Silos score over flat warehouses even in terms of cost. The Myth of Silos

being expensive needs to be broken. In conclusion, Flat Warehouses are no match for silos in

terms of Quality/ Quantity/ Handling losses/ Logistics cost and Storage Space in Grain.

Similarly, procurement and storage of wheat will be greatly affected by the development of

silos pan India.

Important suggestions:



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i. Promote and develop an efficient, integrated and Mechanized Bulk Handling, Storage and

Transportation System in the country.

ii. Give full-fledged infrastructure status to warehousing with all financial benefits like cheap

loans, IT and Service Tax benefits.

iii. Hub and Spoke System needs to be implemented in India. Smaller Silos at Mandi level

connected to Mother Silos. Mother Silos should have Bulk handling and Rail connectivity.

iv. Upcountry Silos also should have rail connectivity.

v. Changeover from Box Wagons to Top Loading/Bottom discharge.

vi. Wagon would go a long way in improving capacity utilization for Railways.

vii. Suitable Top loading/ Bottom discharge wagon to be made available for handling Grain. If

Railways is stressed for funds Private Sector should be suitably incentivised to create

required wagon capacity.

viii. Silo sites should be notified as Mandis under relevant APMC Act by State Governments.

ix. Post-Harvest Agriculture Infrastructure could be created under PPP model to encourage

Private Sector Investment.

x. Our Port Infrastructure should be suitably tweaked to receive and store Grain in Bulk. This

will facilitate both Import & Exports.

Unless these vital issues are not addressed, destruction of Grain may be much faster than its

creation. High productivity/yields may prove futile in real terms. Construction of silos is going

to be the first step to achieve the above objectives. The techno-commercial comparison of silos

and traditional flat warehouse is epitomised below in Table 3.1.

Table 3.1 COMPARATIVES ON SILOS AND FLAT WARE HOUSES

SILOS TRADITIONAL WAREHOUSING Erection cost of rrs 6000 to 6800 per mt Erection cost of rs 3500 to 7800 per mt Commissioning within 8-12 months Completion time of 1-2 years & more. Mechanical process for bulk handling Huge manpower cost Smaller land parcel required Land requirement 2-3 times that of silos Lower maintenance cost Regular repair required High degree of automation No automation No requirement for multiple bagging Huge cost incurred in multiple bagging Quality monitoring at all the stages with minimum

human interference No such provisions

Comparison of Costs (construction and operational) of Silos and Conventional Godowns of

50,000 tonnes capacity as studied in HPC Report is presented in Table 3.2.

Table 3.2 COST COMPARATIVES – SILOS VS. WAREHOUSES

S.N COMPONENTS OF COSTS SILO GODOWN



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1 Land (in acre) 7.00 * 17.50 2 Land Cost (Rs. crore per acre) 0.50 0.50 3 Total land cost (Rs. Crore) 3.50 8.75 4 Construction cost (including civil work, roads, ancillary units,

weigh bridge, electrical, plant & machinery for silos (Rs. in crore)

26.00 25.00

5 Total construction cost (Rs. in crore) 29.50 33.75 6 Construction cost per tonne (in Rs) 5900 6750 7 Operational Cost per tonne (in Rs) 4442 4530

(*) May vary subject to operation plan and track arrangement, Source: HLC Report

The international best practices handle food grains storages in modern silos with bulk

loading/unloading through railway sidings, which reduces the storages and transit losses

substantially. Hence, it is also important to minimize the number of stages of handling. Based

on the above the outsourcing storage and movement through Public Private Partnerships

(PPPs) on a competitive bidding basis would provide the required investments and managerial

competence for effectively managing the supply chain.

Grain supply chain efficiency depends primarily on two things: (a) what is the overall volume

(scale) of grain to be procured, stored and moved; and (b) at each segment of the supply chain,

what technology is adopted to handle grain so that per unit cost is reduced. Normally, if the

scale of operations is large, it would be desirable to introduce bulk handling facilities with

better mechanized system at every level so that one can save on not only the time to turn

around, but also give some relief to labour from carrying lakhs of bags on their backs.

Therefore the vision of the Government and FCI, is to develop modern silos initially at pilot 11

locations with bulk handling facility and thereafter take on a larger scale to about 85 locations

in next five years.



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Chapter 4

TECHNICAL FEASIBILITY

4. TECHNICAL FEASIBILITY

4.1. SITE APPRECIATION: PROPOSED SILO AT KOTKAPURA, PUNJAB

The Site visit and appreciation has been conducted for the proposed brownfield site at

Kotkapura, Faridkot, Punjab for development of Steel silos. The main objective is to study the

existing infrastructure of the FCI facility and to assess the feasibility for the proposed silo

development in the facility.

4.1.1. Location Appreciation

FCI Godown Kotkapura is present on the west-side of the Faridkot City at a distance of 115 km.

This facility is producing complex for FCI operations. FCI Godown Kotkapura is enveloped

around by large dense areas of residential and mix type land use.

4.1.2. Connectivity Status

The direct access to the FCI facility is through connector road coming from National Highway-

15 (Kotkapura Jaitu Road). The site is located adjacent to the highway. The nearest railway

station is Kotkapura which is approximately 1.3 km in north-east side and Sandhwan railway

station at 2.4 km on the other direction of the facility.



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4.1.3. Existing Infrastructure

The total area of the FCI facility is 43.8 acres. The internal road of the existing FCI Facility is 9

m wide with ROW of 15 m. The total existing storage capacity of this facility is 1,21,750 MT out

of which Warehouse capacity is 80,000 MT and of plinth is 41,750 MT. The warehouses are 15

in nos of which, 12 nos are 5000 MT while 3 nos are 6660 MT. Some Plinths are in depleted

state.

A total of 6 Railway tracks are present inside this facility and all are in functional state. These

tracks are divided into 2 tracks of 21 wagons capacity each, 2 track of 15 wagon capacity each

and 2 tracks of 10 wagon capacity each. 12 warehouses have the railway sidings facility. Area

of a warehouse of 6660 MT capacity is 4700 sq.mts (27.8 x 168.5 m). Two weighbridges of 60

and 40 MT are present in the facility out of which only 60 MT is functional. The ROW of railway

track is 13 m. All the grain unloading’s are used by trucks while loading is done by Railways.

No designated Truck parking area is present in the facility. All trucks stand on the internal

roads of the facility. In peak season around 250 trucks can be parked in the FCI facility. On

average per month 55,000 bags (bories) movement are done in the facility. On average per

year 650000 bags (bories) movement are done in the facility. In peak season (April-May) there

is 100% utilization of storage facility.

Existing Utilities - There is a power supply of 145.45 KW for the facility. A transformer of 200

KV is also present in the facility. There are 3 bore well present in the facility from which 1 tank

of 25000 litres is filled. There are 4 dumping pits present in this FCI Facility.

Observations

FCI considers storage base on macro basis for Faridkot and Malod warehouses. State

warehousing agency is also planning for Silo Facility in nearby area. Major Anaj mandis present

within 20 km radius of the facility are KOTKAPURA (3 kms from site), FARIDKOT (15 kms from



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site), BARGARI (15 kms from site), SARAWA (12 kms from site), KHARA (12 kms from site) and

PANJGARI KALAN (15 kms from site).

Sit Visits Photos – Some pictures showing the existing facility are shown below;

Office Block Warehouse Area Stocking of Bags

CAP Area Rail Siding (Double Track) High Voltage Post

High Voltage Tower Borewell Condition of open Plinth

Transformer in the site Overhead Water Tank Main Railway Line

Existing Layout Plan of FCI Depot Complex at Kotkapura FCI Depot, Punjab is presented in

Figure 4.1.

4.2. FACTORS INFLUENCING CAPACITY PLANNING

4.2.1. Factors

The capacity planning part of infrastructural development is one of the most integral parts of

planning and dependent on number of parameters, which need to be critically analysed in

detail. The development of new project need capital investment, hence possibilities and



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limitations need to be factored judiciously and properly. The development of the modern silos

means creation of better storage capacity keeping in view;

- Regulatory framework / recommendations by various applicable committees

- Availability of the land for construction of modern silos

- Conversion of old storage facilities into the modern silos, which means phasing out &

dismantling of CAP for development of modern silos

- Railway Siding feasibility factoring the bulk loading/unloading facility

Gap analysis is to identify the storage shortfall by assessing demand supply of storage facilities.

Further, for the wheat procurement region, gap will be difference between procurement of

wheat and storage facilities available, whereas; for the consuming regions, the gap will be the

difference between the yearly wheat allocation for the State and the storage facilities available.

In the present scenario the modern silos are not only required to add the storage facility for

meeting the storage requirement but to modernise the existing storage system to reap the

benefits of the scientific methods of storage based on the recommendations of the various

committees, which will reduce the intermediaries of supply chain and increase the overall

efficiency of supply chain. Therefore on this basis, first we will follow the regulatory

framework.

a) Schemes and Recommendations

High Level Committee (HLC) set-up by the Government is of the view that;

“Outsourcing storage and movement through Public Private Partnerships (PPPs) on a competitive

bidding basis would provide the required investments and managerial competence for effectively

managing the supply chain. Where required, existing land/facilities can be provided to the PPPs.

Gap Analysis

Conversion of Old Storages

Land Availability

Reg

ula

tory

Fra

mew

ork

CAPACITY PLANNING

Railw

ay S

idin

g F

easib

ility



4-5 | P a g e

FCI should invite bids to convert its own conventional warehouses to modern silos under PPP

mode”.

The whole system of grain management is lagging behind with technology of 1960s and 1970s,

with thousands of workers carrying sacks on their backs, which need to be upgraded to conveyor

belts, forklifts, containers and silos. A major modernization drive of this grain supply chains will

need lot of investments which should be leveraged by inviting private sector and FCI offering its

existing lands with conventional storages, wherever possible. A shift from 'human back' to

'machine back' will promote dignity of labour, will save on time and resources, and be in line with

best international practices in storage and movement.

b) Availability of Land for Construction of Silos

In the VGF based PPP model, the government will provide land to the private developer on

concession and the private developer shall be responsible for development of the project,

hence the land is the critical part for the success of the project, which means the land

ownership either lies with the FCI or state agencies or FCI will acquire land at such a place

where the railway siding facility can be accommodated to enable the bulk loading facility.

The land acquisition is somewhat a time consuming process factoring the availability of land at

such strategic locations, hence FCI is of the view that they will first utilize the vacant land

available within the FCI depots which are having existing railway siding facilities to expedite

the whole process and modernize the existing storage system which will provide enumerable

benefits. Out of proposed 11 locations, 8 locations are within the FCI depots and the remaining

3 are Greenfield sites including the land belonging to State Governments.

c) Dismantling of CAPs / Creation of Land / Conversion of CAPs into Modern Silos

The FCI is envisaging the development of the modern silos in the premises of FCI depots by

using vacant land and also the creation of the land by dismantling of the existing CAPs (Cover

and Plinth). The CAPs are one of the conventional ways of storage of wheat grains, which need

to be upgraded considering the wastage of grains due to CAP storage. Therefore the project

facilities are planned by including the creation of the land area from dismantling of the CAPs. It

also justifies the demand side, because there is transformation from old silo facility to the

modern silo facility

d) Railway Siding Facility

All the modern silos needs to be developed along with bulk loading/unloading facilities

through railway siding, hence it is imperative to plan the capacity in conjunction with the

railway siding. For accommodation of railway rake inside the premises, the minimum length is

required as per the guidelines of railways; therefore this factor will impact the final capacity of

each site in big way.

e) Gap Analysis

This is the last factor taken into consideration, which further revalidates the final capacity of

the modern silos for each site. The overall wheat scenario from macro and micro point of view

detailed out to understand the concept. The details of total wheat production and area over the

years are given below the figure;

4.2.2. State Wise Production

The data showing State wise production for FY 12-13 is presented in Table 4.1.

Table 4.1 STATE-WISE ANNUAL WHEAT PRODUCTION



4-6 | P a g e

State Thousand Tonne (FY 2012-13)

Andhra Pradesh 10

Arunachal Pradesh 4

Assam 44

Bihar 5357

Chhattisgarh 141

Goa -

Gujarat 2944

Haryana 11117

Himachal Pradesh 609

Jammu & Kashmir 462

Jharkhand 319

Karnataka 179

Kerala -

Madhya Pradesh 13133

Maharashtra 1181

Manipur 6

Meghalaya 1

Mizoram -

Nagaland 6

Orissa 2

Punjab 16591

Rajasthan 9275

Sikkim 1

Tamil Nadu -

Tripura 1

Uttar Pradesh 30302

Uttarakhand 858

West Bengal 896

Union Territory: -

A. & N. Islands -

Chandigarh -

D. & N. Haveli -

Daman & Diu -

Delhi 65

Lakshadweep -

Puducherry -

Others -

Top Ten Wheat Producing States (Figure 4.2) reveal that UP, Punjab, MP, Haryana and

Rajastahan are the top 5 wheat producing States. Bihar produces about 5.25 MMT of wheat

annually. Gujarat, Maharashtra, WB and Uttrakhand produce between 1 to 3 MMT annually.



4-7 | P a g e

4.2.3. Procurement of Wheat & Rice

The Government agencies procured a total 250.92 lakh tons of wheat during 2013-14 Rabi

Marketing Season. State wise procurement of Wheat and Rice is presented in Table 4.2.

Table 4.2 PROCUREMENT OF WHEAT BY GOVERNMENT

STATE Wheat Procurement Rice Procurement

2012-13 2013-14 2014-15 2013-14*

lakh tonnes

Punjab 128.34 108.97 116.41 81.06

Haryana 86.65 58.73 64.95 24.06

UP 50.63 6.82 6.28 11.27

MP 84.93 63.55 70.94 10.4

Bihar 7.72 0 0 9.42

Rajasthan 19.64 12.7 21.59 0

Uttara hand 1.39 0.05 0.01 4.63

Chandigarh 0.17 0.08 0.05 0.11

Delhi 0.31 0

Gujarat 1.56 0

Jharkhand

Maharashtra 0.02 1.61

HP 0.01 0

J&K 0.09 0

West Bengal 0.01 0.02 13.59

Total 381.48 250.92 280.23 156.15

4.2.4. State Wise Storage Capacity

The State Wise Monthly Average Storage Capacity with FCI and State Govt. Agencies as on

31.01.2015 is given below in the Table 4.3.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Uttar

Pra

desh

Pu

nja

b

Ma

dhya P

radesh

Hary

ana

Raja

sth

an

Bih

ar

Guja

rat

Ma

hara

sh

tra

West B

engal

Uttara

khand

30.30

16.59

13.13 11.12

9.28

5.36

2.94 1.18 0.90 0.86

Pro

du

cti

on

in

MM

T

Figure 4.2 TOP 10 WHEAT PRODUCING STATES (2012-13)



4-8 | P a g e

Table 4.3 STATE-WISE STORAGE CAPACITY

Storage Capacity with FCI and State Govt. Agencies as on 31.01.2015 (Figures in Lakh MT)

State Total Storage Capacity with FCI (Owned/ hired) Capacity with State agencies

Grand Total Total

Covered CAP Total

Owned Hired Owned Hired Owned Hired Covered CAP Covered CAP

Punjab 22.44 83.37 7.31 1.94 105.61 9.25 33.94 92.67 139.55 101.92 241.47

Bihar 3.66 2.43 1 0 6.09 1 3.45 0 9.54 1 10.54

Delhi 3.36 0 0.31 0 3.36 0.31 3.36 0.31 3.67

Maharashtra 10.73 10.35 1.02 0 21.98 1.02 9.89 31.17 1.02 32.19

Assam 2.12 1.14 0 0 3.26 0 2.5 0 5.76 0 5.76

4.2.5. Gap Analysis

From the above table, the total covered storage capacity with FCI and state agencies in state of

Punjab is around 139.55 lakh MT including covered and CAP storage facilities. Further the total

CAP facility is near to 101.92 lakh MT out of total (CAP and covered) storage capacity of

241.47lakh MT. The covered facilities are preferentially used for storage of paddy and the

remaining facility allocated for wheat. Therefore, the CAP storage facility mainly used for

storages of wheat, which is an obsolete way of storage of Wheat factoring the multiple

disadvantages of CAP facility. Therefore based on the data, it could be inferred that in Punjab,

the total storage capacity in form of CAP is around 101.92 lakh MT. Further to this, the total

procurement of Wheat and Rice in Punjab is around 197.47 lakh MT, whereas the total covered

storage capacity in Punjab is around 139.55 lakh MT, hence there is a deficit or gap of 57.92

Lakh MT storage capacity to accommodate the procured wheat. Therefore, the idea of

development of the modern steel silos for wheat is well justified from demand supply point of

view as well as from conversion of CAP storage facility into modern steel silos, which will

increase the operational efficiency substantially and add value to the supply chain of food

grains. The analysis is given below in the table:

Particulars Figures

Procurement of wheat in FY 2014-15 in Punjab (A) 116.41 Lakh MT

Procurement of Rice in FY 2013-14 in Punjab (B) 81.06 Lakh MT

Total Procurement of Wheat and Rice in Punjab C =A+B 197.47 Lakh MT

Total (covered and CAP) Storage Facility with FCI and State Agencies in Punjab

241.47 Lakh MT

Total Covered Storage Facility with FCI and State Agencies (D) 139.55 Lakh MT

Total Storage Facility Gap considering covered only in Punjab E= C-D 57.92 Lakh MT

Total CAP storage facility of FCI and State Agencies in Punjab (F) 101.92 Lakh MT

Opportunity to convert CAP into Steel Silos factoring storage Gap in Punjab G= E

57.92Lakh MT

Proposed Capacity of Steel Silo at Kilaraipur (H) 50000 MT

(possibility of future expansion of 1.5 Lakh MT)

Proposed Capacity of Steel Silo at Sahnewal (I) 50000 MT

Proposed Capacity of Steel Silo at Patiala (J) 50000 MT

Proposed Capacity of Steel Silo at Kotkapura (K) 25000 MT

Total Proposed Capacity addition through development of Steel Silos at 4 locations L= H+I+J+K

175000 MT



4-9 | P a g e

4.3. SUPPLY CHAIN OF MODERN SILOS

The supply chain of a Silo Complex of FCI depends on the geographic location of the Complex

i.e. it may be located in a “Producing Area” or a “Consuming Area”.

The supply chain of a Silo complex is as described below:



4-10 | P a g e

General Arrangement Drawing (GAD) of both “Producing Area” and “Consuming Area” Silo

Complex is presented as Annexure A and Annexure B.

Unloading and weighing

•Grain shall be unloaded and conveyed to shipping silo / bagging silo

•During the process of conveying online weighing will take place

Dispatch

•Dispatch at producing area shall be by Train and in Bulk. Provision for dispatch by Train or Truck after bagging shall be made. Bulk dispatch by Truck shall also be provisioned.

•Dispatch at consuming area shall be by Truck after bagging. Provision of bulk dispatch by truck shall also be made.

Receipt of Grain

•Grain shall be received in Bulk transported in Trucks or Trailer in Producing areas

•Grain receipt in Consuming area shall be in Bulk transported by Train.

•Grain may be received in Bagged form and then Debagging needs to be done

Testing

•The quality of the grain received will be tested to find out if the same meets the FAQ standards.

• In Producing Area, grain meeting FAQ standard shall be acepted and grain not meeting the FAQ standard shall be rejected.

•Bulk weighing of grain shall be done

Cleaning

•Grain shall be moved from receiving Silo to the process tower which houses the cleaning units

•The grain shall be cleaned to remove foreign contaminents

•The cleaning process shall only account for a maximum weight loss of 0.5%

Storage

•After cleaning the grain shall move to the main silo's for long term storage.

•Fumigation of Silo shall be done before storage of grain and in intervals of 6 months

•Aeration and mechinical ventilation system shall be part of the silo

•Temperature monitoring shall be done on a day to day basis



4-11 | P a g e

4.4. CAPACITY PLANNING AND PROJECT FACILITY

The Project is being planned in wheat “Producing Area” and hence the silo complex shall have

facilities of receiving food grain in bulk and bagged form by road. The primary offtake/issue

will be in bulk form and transportation by railroad is envisaged. However facility for bagging

for bagged dispatch by Rail or Road will also be provisioned for. Further, provision of bulk

dispatch by road is also be made.

Kotkapura Depot of FCI at present stores wheat in CAPs/warehouses and the total capacity

available in CAPs is 41,699 MT. In consonance to the various policies adopted by FCI discussed

before CAP storage of wheat needs to be phased out and replaced with scientific storage

facilities like Steel Silo. The GAP analysis in earlier section suggests that an additional storage

capacity of 25,000 MT shall also be required.

The area available at Kotkapura depot suitable for development of Silo complex is

approximately 5.69 acres. New lines from the existing Railway siding is feasible which would

cater dedicatedly to the Silo Complex. In view of the above facts, a Silo Complex of 25,000 MT

has been planned.

4.5. PROJECT SCOPING

Kotkapura Depot of FCI is planned to have a 25,000 MT silo complex. The land area utilised to

accommodate this Silo complex is approximately 5.69 acres. The Complex shall have the

following facilities:

•Weigh Bridges

•Unloading Station

•Conveying System

•Receiving Silos

Grain Receiving Infrastructure

•Cleaning Station

•Online Weighting

•Conveying System

•Long Term Storage Silo

Grain Storage

•Shipping Silo for Bulk Wagon Loading

•Shipping Silo for Bulk Truck Loading

•Bagging Station

Grain Dispatch Infrastructure

Railway Siding, Truck Parking, Grain Testing Laboratory, Administrative Block, Bag

Storage, Power Infrastructure, Water Infrastructure, Drainage Infrastructure, Fire

Detection & Fighting, Gates & Boundary,

Modern Silo Complex



4-12 | P a g e

Grain Receipt -

a. Weight bridges atleast 1 nos of 60 MT capacity for weighing

trucks/trailers comming in with grains

b. Truck Triplers 1 nos at unloading bays

c. Grain receipt pits with Receiving Hoppers 3.5 mx 3.5m x 1.5 m,

6 Nos.

d. Grain conveyor: Chain Conveyor 150 TPH

e. Bucket Elevator 150TPH

f. Receiving Silos - 2 Nos, 250 MT with intake capacity of 150

TPH

Process Tower -

a. Chain Conveyor 150 TPH to process tower

b. Chain Conveyer & Bucket Elevator 150 TPH to main silo

c. Chain Conveyer & Bucket Elevator 60 TPH, to shipping/bagging

silos

d. Pre-cleaner + Aspiration System 150 TPH

e. Vaccum De-stoner 150 TPH

f. Magnetic Seperator 150TPH

g. On line weighing system 150 TPH

Storage -

a. 4 x 6250 MT main storage silos with -

1. H- Type / F - Type floor aeration system

2. Aeration Fans atleast 4 Nos. of capacity 6 to 6.5 m3

3. Close Loop Fumigation system

3. Roof Vents and Mechinical ventilation system

4. Sweep Auger capacity 60 TPH

5. Over Silo Catwalk of width 1.60 m and Support Package

6. Silo Access Package (Ladders and Platforms)

7. Sensor Package (High Level Sensor, Low Level Sensor, Sweep

Auger Parking Switch, Side wall door limit switch etc.)



4-13 | P a g e

Grain Dispatch -

i. Shipping Silo for bulk wagon loading 4000 MT

ii. Wagon Loading Hoppers at least 2 nos of capacity 700 TPH each

iii. Railway siding

iv. In-motion weigh bridge for wagon of capacity 120 MT

v. Bagging Silo (Hopper Bottom) of 60 MT and Bagging Shed

vi. Bagging System of capacity 60 TPH (2 Station of 30 TPH with

surge bins of 50 MT )

vii. Bulk Truck Loading Silo (Hopper Bottom) of 100 MT

4.6. ASSOCIATED INFRASTRUCTURE

4.6.1. Internal Roads and Parking

Internal roads of width 7.0 m are planned for the Silo Complex. Concrete pavements are

envisaged in view of the fact that mostly heavily loaded vehicles shall be plying on them. The

pavement design shall be as illustrated below.

The parking bay shall have space for parking at least 20 Trucks, 4 Cars and 24 Two wheeler.

4.6.2. Power Supply

The connected load required for the Silo Complex is 400 KW shall be installed. The power

infrastructure shall have at least the following components:

•Compacted Soil of CBR 20

•250 mm thich GSB

•150 mm thick WMM

•50 mm thick sand

•125 micron polythene sheet

Base Layer

•200 mm thick M30 concrete broom finish

•Contraction joints at every 5 m interval

•Expantion Joints at every 30 m interval Main pavement

•25 mm bituminious concrete

•6 mm thick bituminious seal coat Protection



4-14 | P a g e

It is envisaged that all cables shall be laid underground through RCC hume pipes and

inspection chambers shall be provided at every 30 m interval.

Backup power DG Set of 250 KVA is envisaged.

4.6.3. Fire Detection and Fighting System:

The entire complex shall be provided with fire detection devices which would include smoke

detectors, alarms and public announcement system. The fire-fighting system shall consist of

the following major components:

i. Underground Water Storage Reservoir (UGR) of at least 3,00,000 Litres capacity (2,00,000

Lts dead storage for fire fighting & 1,00,000 Lts for consumption)

ii. Underground pump house which shall have space for –

Fire Pumps: 1 Working + 1 Stand by

Diesel Pumps: 1 Working + 1 Stand by

Jockey Pumps: 1 Working + 1 Stand by

iii. Supply main of 150 mm dia. to UGR

iv. Distribution main of 100 mm with Hydrants fitted at every 30 m intervals

v. All electrical equipment rooms and the process tower shall also be equipped with suitable

numbers of CO2 or Dry Powder based extinguishers.

4.6.4. Buildings and Sheds

Other than the bagging shed already mentioned the following buildings and sheds shall be part

of the complex -

HT PANELS

TRANSFORMERS 3 Nos

LT PANELS

LT & HT CABLES

BUS DUCTS

EARTHING SYSTEM

LIGHTING ARRESTORS



4-15 | P a g e

Administrative Buildings: The administrative building shall be a RCC structure with floor

space of 85 sq ft minimum.

Laboratory: The laboratory may be a separate structure or clubbed with the Administrative

building. The minimum floor space of Laboratory shall be 80 sqm.

Reception & Canteen Room: The canteen and rest room may be a separate structure or

clubbed with the Administrative building. The minimum floor space for the same shall be 250

sqm.

Bag Storage Shed & CAP: The same shall be a MS Steel structure with sheet roofing. The

minimum area required shall be 200 sqm. A separate compartment of at least 80 sqm shall be

made for storage of empty bags etc. The capacity of the storage shed shall be 200 MT.

CAP of 500 MT shall also be provided for storage of bagged grains

Utility & Maintenance Shed: The same shall be a MS Steel structure with sheet roofing. The

minimum area required shall be 250 sqm as per specifications and standards adopted by FCI.

Security Post: Silo complex shall have at least 5 security post the minimum size of each of such

post shall be 4 sqm.

4.7. RAILWAY SIDING

Location

Kotkapura FCI Depot is located on Ferozepur – Bathinda now electrified section and as such

the silo loading can be carried out by direct loading by Diesel Engine. The length of approach

siding for this depot after take-off is only 416 m up to FCI entry gate and even the total length

available inside the depot is also only 645 m and as such it will not be feasible to provide full

rake bulk loading system. The only possibility is to provide half rake loading system by joining

the lengths of siding outside and inside the FCI gate and as there is no road crossing on the

approach siding in this case. This arrangement will be workable.

Proposed Layout of Siding

In this case the layout has been designed by breaking the available length outside and inside

the depot into two half rake spurs beyond the proposed location of silo which will enable full

rake being received clear of the fouling mark ‘G’ (Ch:167) between the existing FCI siding and

proposed new line for silo loading. Necessary shunting for breaking and loading the rake into

parts and then re-joining the two parts into a single full rake will be done within the above

available length of track clear of the Derailing switch provided for isolation from Northern

Railway main line. The loading of rake will be carried out in two half parts by pushing under

the silo as described in next para.

The proposed layout of Railway Siding at Sahnewal is enclosed as Annexure C.



4-16 | P a g e

Methodology for Train Operation

i. Empty rake received from serving station in pulling mode with engine facing.

ii. After entering FCI Depot gate the empty rake takes route A-B and moves on Line-1 (L-1)

till engine reaches point ‘C’.

iii. Engine detached at C and turned around via X-over C-D and line No. 2 (L-2) to get attached

on rear of the rake on line no. 1 (L-1).

iv. B-van detached from rear of the rake and reversed on brake van loop and placed at buffer

end of line No. 2. (L-2).

v. Engine goes back to attach at rear of the rake and pulls back first part of the empty rake

ensuring that the remaining part on Line No. 1 (L-1) remains clear of point G, being the

fouling mark bet L1 and L2.

vi. The detached part of the rake is then pulled up to silo and loaded by pushing under the silo

via route EF and parked on line 2.

vii. The engine thereafter, pulls back the remaining part of the empty rake lying on line No.1

(L-1) till clear of the loading silo. This part of the rake is then loaded by pushing under the

silo on line No. 1 (L-1) till whole of the rake is loaded fully. After completing the loading of

this part, the loaded part of the rake from line No. 1(L-1) is drawn back till its rear wagon

reaches point ‘E’.

viii. The loaded part on line No. 1 (L-1) is then pushed via X-over EF to attach with the earlier

loaded part of the rake lying on line No. 2(L-2) at the rear to form full rake for dispatch

with the brake van attached at the rear..

TECHNICAL FEASIBILITY

The Koktapura Silo complex is planned within the existing Depot at Kotkapura. The land area

en-marked by FCI for the same is approximately 6.00 Acres. The dismantling of existing CAP’s

to develop the Silo complex has been considered. The railway siding for the complex takes off

from the existing siding that presently services the Depot.`

The Silos, Process Tower, Grain receipt and dispatch infrastructure planned are positioned to

facilitate loading of grain in wagons close to the entry point of the wagons. As described in the

earlier section a Split placement of rack is envisaged for the new Silo Complex in view of the

fact that length of the land available is not enough to accommodate Full Rack placement.

Annexure – C: Site Layout Plan, illustrates the alignment of the new siding along with the

various components of the Silo Complex.

3.78 Acres of land has been utilised for accommodating the Silo Complex. The railway siding in

addition utilises 1.90 Acres of land.

It is evident from the GAP analysis done in the earlier section that additional storage space is

required at Kotkapura Depot for storage of wheat. Further, as per policies adopted by FCI bulk

storage of wheat in Silos is being given a major thrust in better interest of the Nation and food

security of the population.

The land available in Kotkapura Depot is suitable and sufficient to accommodate all

infrastructure required for a 25,000 MT Silo Complex including Railway Siding as illustrated in



4-17 | P a g e

Annexure C. The road connectivity for receipt/dispatch of grain is adequate. Further, power

supply in the region is sufficient. Water and drainage infrastructure is present at site.

Hence, considering the above facts it is concluded that a Silo Complex in Kotkapura is

technically feasible. The key parameters of the site are as presented in Tables 4.5 & 4.6.

Table 4.5 KEY PLANNING PARAMETERS AT PROPOSED KOTKAPURA SILO COMPLEX –

CIVIL, ALLIED AND STORAGE EQUIPMENT

Project Site Nature of Site

Type of Facility Planned

Existing Capacity

Capacity Planned

Future Capacity Planned

Area of Silo

Complex (Acre)

Kotkapura Brown Field Producing Area Silo Complex

41699 MT 25000 MT - 3.78

Table 4.6 KEY PLANNING PARAMETERS AT KOTKAPURA SILO COMPLEX – RAILWAY

SIDING

Project Site Length of Railway Track ahead

Loading Point

Length of Railway Track

behind Loading Point

Type of Railway Siding

Number of New Tracks

Area of Siding (Acre)

Kotkapura 530 m 417 m Split Placement 2 1.91

5-1 | P a g e

Chapter 5

PROJECT COSTING AND FINANCIAL VIABILITY

5. PROJECT FINANCIAL VIABILITY & SUSTAINABILITY

5.1. Rationale of Viability Analysis under VGF model on DBFOT basis under PPP

One of the key objectives of the PPP mode of implementation is to ensure projects are

viable and sustainable as a whole covering technical, commercial, financial, economic and

social aspects. A detailed study of financial viability of the Silos for Kotkapura, Punjab

location and a Sensitivity Analysis has been undertaken under various cases to assess the

impact on cash flows for different operating conditions and judge its sustainability.

5.2. PROJECT COST

5.2.1. Factors affecting Project Cost

The cost of project needs to be estimated to assess the financial viability of the project.

The project scoping and sizing is critical aspect while evaluating the project cost, therefore

following factors are taken into consideration

Regulatory framework / recommendations by various applicable committees

Availability of the land for construction of modern silos

Conversion of old storage facilities into the modern silos, which means phasing out

& dismantling of CAP for development of modern silos, which means up gradation

of existing storage facility into modern silos

Railway Siding feasibility factoring the bulk loading/unloading facility

As per the submitted technical feasibility report, the total capacity of 25000 MT is

proposed for the Kotkapura, Punjab location for development of modern silos under PPP

mode

The block estimated project cost primarily comprises of four major components, which

are given below:

a) Building & Civil Works

b) Silos Plant & Machinery

c) Electrical & Other Utilities

d) Railway Siding

The cost of the Project has been arrived with the help of predominantly the following the

quotations received against P&M, prevalent market rates and effective SoRs.



Development of Silos at Kotkapura, Punjab under PPP Mode: Financial Analysis and Revenue Model

5-2 | P a g e

5.3. Consolidated Cost Summary of project

The summary of the Total Block Cost is given in Table below

Sl no. Item Description Rs. in Million

1 Land & Land Development 2.19

2 Building & Civil Works 86.19

3 Electrical & Other Utilities 24.92

4 Silo Plant and Machineries 150.75

5 Railway Siding 62.40

Total Block Cost 326.43

The component wise further break up of block cost is given below in the table:

5-3 | P a g e

Land & Land Development

Sl No.

Particulars Unit Qty Rate in Rs Amount in Million

Rs

Remarks on Qty Remarks on Rate

1 Land Acres 5.69 0 0 3.78 Acres for Silo Complex + 1.90 Acres for Railway Siding

CPWD PAR - 2012 6.1 Development of Land : Rs 95.00 / Sqm 2 Land Development Acres 5.69 384465 2.19

4 Total (Rs. in million) 2.19

Building & Civil Works

Sl No.


Rs


1 Main Silo Foundation sqm 2243 9500 21.30 Area of all Silos as per details provided in table captioned "Silo and Grain Handling equipment’s" + 25% to account for greater width of foundation.

CPWD PAR - 2012 1.2.9 Raft Foundation - Rs 6450 1.2.8 Earthquake Resistance - Rs 1140 1.2.5 Additional 0.3 Mts below Normal foundation depth of 1.2 Mts - Rs 270 1.2.4 Additional 0.3 Mts above Normal plinth of 0.6 Mts - Rs 270 Depth of Foundation considered 3 Mts hence additional amount to be added Rs 1620 Plinth Height considered 0.9 Mts hence aditional amount to be added Rs 270 Hence overall rate Rs 9480 rounded to Rs 9500

2 Civil Works related to other Process Infrastructure

sqm 1807 19000 34.33 Area of Process Tower, Bagging Shed and In motion Weighbridge & Unloading shed +300 Sqm (3m wide x 100m long) added to account for conveyor tunnels

CPWD PAR - 2012 1.3.1 Basement with 3.35 Mts Height - Rs 19000




5-4 | P a g e

3a Bag Storage Godown sqm 200 8073 1.61 MCA advocates 700 MT storage of Bagged Grains. 200 MT covered & 500 MT CAP. As per standard adopted by FCI 1500 sqm is required for 2500 MT storage. Hence for 200 MT 120 Sqm of area is required. Additional 80 sqm has been considered for misc. storage eg. Empty bags, etc. The 80 sqm area shall be a separate compartment

Thumb Rule rate of Rs 750/ sqft adopted for Shed Structure and Rs 1250/MT for CAP (The CAP rates is as per rates adopted by FCI)

3b Bag Storage CAP MT 500 1250 0.63

4 Utility & Maintenance Work Shop Shed sqm 250 8073 2.02 As per standard and specification adopted by FCI for Silo Complex

5 Reception & Canteen Building sqm 150 11700 1.76 As per MCA 250 sqm area is required for 50Th MT storage complex hence for 25 Th MT storage complex 100 sqm has been reduced.

CPWD PAR - 2012 2.2.2 Rate for Double Storied - Rs 11700

6 Security Rooms sqm 20 11700 0.23 5 guard room of size 2.5m x 1.5 m

7 Admin. Building sqm 85 11700 0.99 15 staff @ 60 sq ft per staff = 84 sqm Rounded to 85 sqm

8 Laboratory Room sqm 80 11700 0.94 As per standard and specification adopted by FCI




5-5 | P a g e

9 Civil Works for Weight Bridges (2 nos 60 MT) Nos 1 250000 0.25 As per MCA As per Quotation 1 enclosed

10 Civil Work for In-motion Weighbridge for Rail LS 1 390000 0.39 As per MCA As per Quotation 1 enclosed

11 Civil Works related to Sub-station & area lighting

KW 400 4500 1.80 Power requirement calculated as per Industry standard

As per Industry Standards

12 Hume Pipe laying for HT & LT cables Rmt 1000 566 0.57 1000 Rmt for HT cables & 1000 RMT for LT cables (considering multiple run of LT cable within the same hume pipe network

CPWD DSR E&M 2014 Item No. 14.14.4

13 Civil Works related to Water & Fire Fighting Infrastructure

Lts 300000

17 5.10 2.00 Lacs Dead Storage for Fire + 1.00 Lacs consumption

PAR - 2012 5.5 Underground Sump - Rs 15 Rate considered Rs 17 13.5% increase considered to account for two wheeler parking on top

14 Civil Works related sanitation Infrastructure Lts 90000 15 1.35 Convention is to taka 80 % of consumption. However 10% more considered considering mass kitchen at canteen

PAR - 2012 5.5 Underground Sump - Rs 15

15 Open Truck Parking sqm 1400 1684.05 2.36 20 Trucks x 70 sqm per truck (area includes circulation) [Numbers as per MCA]

Refer Rate Analysis - RA 3

16 Open Car Parking sqm 128 1514.17 0.19 4 Cars x 32 sqm per car (area including circulation) [Numbers as per MCA]


17 Existing Road Refurbishment sqm 740 2628.52 1.95 Existing Road Length = 305 m Area of Existing road = 2960 Sqm Area considered for refurbishment @ 25%


18 Internal Roads sqm 509 2628.52 1.34 Length of Road =75 m (approx) Width of Road = 7 m





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19 Internal Pathways sqm 808 740.35 0.60 Length of Road = 380 m Width of Pathway = 1.6 m (2 pathways on each side of road of width 0.80 m) Hence Area of Pathway = 608 sqm (approx.) Add 200 sqm for entrances Hence total quantity = 808 sqm (approx)

DSR - 2014 Code No. 16.91

20 Internal Sewerage sqm 785 110 0.09 Total area of Sl no. 3, 4, 5, 6 and 7 CPWD PAR 2012 6.3: Sewer

21 Internal Drainage sqm 23031 85 1.96 Area of 8.64 Acres converted to Sqm

CPWD PAR 2012 6.5: Storm water Drainage

22 Boundary/Fencing including Gates mts 1759 2500 4.40 Proposed length of boundary wall as per drawing

Market Rate for 1.5 m high brick work boundary wall with concrete columns on isolated footings connected by concrete tie beam. Distance between columns 3m. Concentring coil on MS Y angle on top

23 Soft Land Scape sqm 250 175 0.04 Adhoc consideration Same for all project location

CPWD PAR - 2012 6.6 Land Development for Horticulture Operations Rs 80 / sqm Additional Rs 95 / sqm for Plants & Tress Rate considered Rs 175 / sqm


Electrical and Other Utilities

Sl No.


Rs


1 In Motion Weigh Bridge for Railway Siding Nos 1 1600000 1.60 As per MCA As per quotation 1 enclosed

2 60 MT weigh bridge for Trucks Nos 1 680000 0.68 As per MCA As per quotation 1 enclosed




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3 Sub-station Equipment’s & Installation KVA 500 7500 3.75 400 KW power is required considering a power factor of 80%, 500 KVA is considered

CPWD PAR 2012, Supplementary for specialised E&M works published in 2014 Item No. 1

4 HT Cables Rmt 500 4023 2.01 Assumed Quantity Refer Rate Analysis - RA 4

5 LT Cables Rmt 1000 743 0.74 Assumed Quantity Refer Rate Analysis - RA 5

6 Area Lighting LS 23031 95 2.19 100% of the Area of site considered for artificial illumination during dark hours

CPWD PAR 2012 6.7.1: Street Lighting

7 Electrical Connection Cost KW 400 750 0.80 400 KW power is considered Rate adopted from Silo Project done by MP Warehousing Corporation which has been approved by EI of DEA Rs 750 per KW + additional lump sum amount of Rs 5,00,000/-

8 Internal Electrification for buildings LS 1 944044 0.94 Lump Sum CPWD PAR 2012 3.3 : 12.5% of the cost of building works

9 Back Up Power DG (1 x 250 KVA DG Set) KVA 250 10000 2.50 50% power backup is considered CPWD PAR 2012, Supplementary for specialised E&M works published in 2014 Item No. 2

10 Fire Fighting Equipment’s Sqm 5335 75 0.40 Total area of Sl no. 1, 2, 3, 4, 5, 6,7 and 8 of Building and Civil Works Head

CPWD PAR 2012 6.7.1: Peripheral Grid 25% increment made to provision for Hydrant points

11 RFID Cost Set 1 6000000 6.00 1 set required per site Rate adopted from Silo Project done by MP Warehousing Corporation which has been approved by EI of DEA

12 Fumigation System MT 25000 36 0.90 Total long-term storage capacity is 50 Th MT

13 Office Furniture LS 1 1500000 1.50 Lump Sum

14 Communication Equipment’s LS 1 163547 0.16 Lump Sum CPWD PAR 2012 3.6.4: 0.5% of the cost of building works 3.6.5: 1.0% of the cost of building works 3.6.6: 0.5% of the cost of building works Hence total 2% of the building works




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15 Internal Water Supply and Sanitation Installation

LS 1 327094 0.33 Lump Sum CPWD PAR 2012 3.1: 4% of the cost of building works

16 Connection of Sl no. 13 above to Mains LS 1 408868 0.41 Lump Sum CPWD PAR 2012 3.2: 5% of the cost of building works


Silos and Grain Handling Equipment’s

Sl No.


Rs


1 Main Storage Silos 6300 MT capacity Nos 4 12503925 50.02 Total Capacity required is 25000 MT

Derived Rates from quotation 2, considering the rate of 4000 MT silo

2 Shipping Silo 4000 MT capacity Nos 1 7939000 7.94 As per standard and specification adopted by FCI

As per quotation 2 enclosed

3 Receiving Silo 250 MT capacity Nos 2 1130000 2.26

4 Bulk Truck Dispatch Silo 100 MT capacity Nos 1 1181000 1.18

5 Bagging Silo 60 MT capacity Nos 1 1063000 1.06

6 Support Structures LS 1 20404000 20.40 As per supplier specification

7 Material Handling Equipment’s & Electricals LS 1 72211000 72.21 As per requirement

8 Erection and Commissioning LS 1 10871000 10.87 As per supplier specification

9 Transportation LS 1 1550737.00

1.55 1% of the cost of equipment’s

10 Total 167.50

11 Normative cost considered for calculating Project Cost

150.75 Reduction of 10% considered since the quoted price is budgetary in nature

Railway Siding

Sl No.


Rs





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1 Preparation and consolidation of sub grade with power road roller of 8 to 12 tonne capacity after excavating earth to an average of 22.5 cm depth, dressing to camber and consolidating with road roller including making good the undulations etc. and re-rolling the sub grade and disposal of surplus earth with lead upto 50 metres.

Sqm. 15000 81.30 1.22 As per Industries Standard CPWD DSR - 2014 Item No. 16.1

2 Supplying & laying BG 60 Kg Track on PSC sleeper @ 1540 sleepers/Km., EF & 250 mm ballast cushion.

Km. 2.160 14515653.50

31.35 Track length required for siding Refer Rate Analysis - RA 6

3 Supplying & laying 1 in 8.5 BG, Turn outs 60 Kg. on PSC sleepers.

Set 9 1500000.00

13.50 As per Industries Standard As per Industries Standard

4 Providing Buffer stops Each 2 300000.00 0.60

5 Drainage of yard lines L.S. 1 1000000.00

1.00

6 Provision of level crossing/pedestrian crossing. L.S. 1 1000000.00

1.00

7 Signalling and Interlocking L.S. 1 5000000 5.00

8 Supervision Charges % 1 10% 5.37 As per Indian Railway Norms As per Indian Railway Norms

9 Codal Charges % 1 6.25% 3.35


6-1 | P a g e

6. PROJECT FINANCIALS

The project financials are important to assess the project viability under various scenarios. The

detailed financial analysis of the project has been worked out to ascertain the cash flows

generated from the project.

6.1. Assumptions and Summary

Project: Development of Modern Silo Complex at Kotkapura, Punjab under DBFOT

basis under PPP mode

Rationale of the project: Food grains storages in modern silos with bulk

loading/unloading through railway sidings reduces the storages and transit losses

substantially.

Social Impact: Reduce the wastage of grains, improves the quality of the grain, reduces

the O&M expenses and improves the efficiency of the supply chain of food grain

procurement and distribution

Total land area required: 5.69 acre

Total land area for silos complex: 3.78 acre

Total land area for railway siding: 1.90 acre

Total Capacity of the Silos: 25000 MT ( 4 bins with 6250 bin Capacity)

Components of the Project: Long term storage Silos, Pre Storage Silos, Shipping Silo,

Loading & Unloading facilities, Fumigation and Aeration, Bagging and De-bagging

facilities, Cleaning facilities, Weighing facilities, Lab for testing, Miscellaneous Storages,

Admin Block, Utility Infrastructure and Railway Siding

Total estimated financial project cost: Rs.356.25 million

P&M Cost: Rs.150.75 million

Building & Civil Works: Rs.86.19 million

Term Loan: Rs.178.13 million

Maximum VGF of 20% of the TPC: Rs.71.25 million

Equity from promoters: Rs.106.88 million

Construction period: Two years Concession Period: 30 years including construction

period

Term Loan period: 11 years including two years construction period

Repayment Period of principal amount: 9 years

Installments: Quarterly installments

Interest rate: 11% (Concessional funding from FIs considering agri sector)




6-2 | P a g e

Interest During Construction: Rs.12.25 million

Corporate Tax: 34.60% and Minimum Alternate Tax (MAT): 21.34%

Revenue sources to private developer: Fixed Charge, Variable Charge and Handling

Charges

Expenses: Power, Manpower, Handling Costs, Fumigation, Insurance, Railway Siding

R&M and Miscellaneous expenses

Yearly escalation of Charges as per Price Index: Indexation (70 % of WPI and 30% of

CPI for Fixed and Variable) and 80% of CPI for handling charges

Assumed yearly O&M expenses escalation

Particulars Yearly Growth

Escalation in Fumigation Charges 3.0%

Power Cost escalation 3.0%

Manpower Cost escalation 5.0%

Administrative Expenses Escalation 3.0%

Insurance escalation 3.0%

Insurance assets escalation 3.0%

Admin charges as % of sales 1.0%

R&M Charges

1-3 years 1.00%

4 - 8 years 1.50%

9 to 13 years 2.00%

14th Year onwards 3.00%

Railway Siding expenses escalation 2.00%

Miscellaneous Expenses escalation 2.00%

WACC: 11.09%

Base case: 20% VGF

Average DSCR: 0.90 assuming 20% VGF and 11% interest rate.

Financials Indicators: Project IRR, NPV, Equity IRR and DSCR

Particulars 40%

VGF

30%

VGF

20%

VGF

15% VGF 10% VGF No VGF

Project IRR 10.08% 8.31% 6.88% 6.28% 5.72% 4.72%

Project NPV (Rs.in mill) -18.33 -57.39 -97.32 -117.15 -137.42 -178.65




6-3 | P a g e

Equity IRR 12.94% 10.73% 8.88% 8.10% 7.37% 6.06%

DSCR 1.50 1.13 0.90 0.82 0.75 0.64

Bid Parameter: VGF Positive or Negative

VGF requirement for financial sustainability: The expected VGF for the project is

around 40% of the total estimated project cost for financially sustainability on the basis

of estimated project cost. However the detail sensitivity analysis has been carried out to

assess the financial viability under various scenarios.

6.2. Project Cost

The details of the final estimated project cost are given below in the table. In the calculation of

financial project cost, the essential project cost component’s such as preliminary expenses,

preoperative expenses (IDC etc.), margin money for working capital and contingency. The

proposed project shall be implemented under VGF model of the PPP, therefore the means of

finance comprises of three parts constitutes equity infused by the promoters, the debt in form

of term loan from banks/FIs and the viability gap funding from GoI. The equity in the project

is assumed to be 30% and the remaining share of 70 % shall be in form of debt from banks and

the VGF from GoI. As per the guidelines of VGF under PPP mode for the infrastructure project,

the central government will provide up to 20% VGF for the project and state government will

provide another 20% for the project, therefore the VGF is capped at 40% of the total project

cost. But in this project the maximum permissible VGF is capped at 20% in form of VGF

provided by central government, as the project is envisaged by the central government.

Rs. in million

Particulars Amount

Land 0.00 Land Development 2.19 Building and Civil Works 86.19 Electrical & Other Utilities 24.92 Plant & Machinery 150.75 Railway Siding 62.40 Prelim and Pre- operative costs @2% 6.53 IDC 12.25 Margin Money for working capital 1.25 Contingency@ 3% 9.79 Total estimated project Cost 356.25




6-4 | P a g e

6.3. Means of Finance

Base Case Rs. in million

Particulars Amount

Equity from promoters 106.88 Sub Total 106.9 VGF Grant (20% VGF) 71.25 Term Loan from Bank 178.13 Sub Total 178.13 Total 356.25

Note: The debt repayment period assumed 11 years including two years construction period for

the project. The interest rate assumed on debt (Term Loan) component is 11% pa factoring the

concessional funding from FIs/ Banks for agriculture related activities

6.4. Revenues

The proposed project capacity is 25000 MT for storage of wheat. As per the model concession

agreement, the authority will pay to the concessionaire the fixed storage charges for the created

capacity for the defined concession period and also pay the variable charges as per the actual

handling of wheat. Apart from these two mentioned charges the authority will pay handling

charges to the concessionaire.

Revenues Stream from the Silo Project

Fixed Storage Charges for the created capacity

Variable Charges for the actual handling of the food grains

Handling Charges

Therefore the revenues are assured by authority and the details of revenues generated from

the silo project for 28 years (assuming two years construction period) are present in the table

given below:




6-5 | P a g e

2018-19

2022-23

2027-28

2032-33

2038-39

2043-44

2046-47

Revenue from Silos 1 5 10 15 20 25 28

Capacity of the cold storage (MT) 25,000 25,000 25,000 25,000 25,000 25,000 25,000

Capacity Utilization (%) 98% 98% 98% 98% 98% 98% 98%

Capacity utilization in MT 24,500 24,500 24,500 24,500 24,500 24,500 24,500

Fixed Storage Charge (Rs./MT/ Month) 97.40

Escalation as per WPI & CPI 6.00%

Final storgae charge after factoring price index

97.40 142.93 172.90 209.15 252.99 306.04 343.06

Reduce annually by 2% 97.40 140.07 169.44 204.96 247.94 299.91 336.20

Above the normative capacity additional 1 %

500.00 500.00 500.00 500.00 500.00 500.00 500.00

Applicable Fixed Storage charge 48.70 70.04 84.72 102.48 123.97 149.96 168.10

Fixed charge from additional 1% capacity 0.29 0.42 0.51 0.61 0.74 0.90 1.01

Fixed Charge 28.9 41.6 50.3 60.9 73.6 89.1 99.9

Volume of Grain Handled 24,500 24,500 24,500 24,500 24,500 24,500 24,500

Variable Charges (Rs./MT/ Month) 7.09 8.95 11.98 16.04 21.46 28.72 34.20

Increment in variable storage costs p.a. 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%

Variable Charge 2.09 2.63 3.52 4.71 6.31 8.44 10.06

Total Storage Charge 31.0 44.2 53.8 65.6 79.9 97.5 109.9

Net Revenues from Silos in Rs. Million 31.0 44.2 53.8 65.6 79.9 97.5 109.9

6.5. Operational Expenses

There are various heads of yearly operational expenses presented in the table which need to be

incurred by the selected private developer to maintain the facility. The O&M expense will cover

all the major heads and also provision has been made for miscellaneous expenses.

Particulars 1 5 10 15 20 25 28

Power / Energy Charges 2.00 2.25 2.61 3.03 3.51 4.07 4.44

Manpower Cost 2.00 2.43 3.10 3.96 5.05 6.45 7.47

Admin Charges 0.31 0.44 0.54 0.66 0.80 0.98 1.10

Fumigation Costs 0.41 0.46 0.53 0.61 0.71 0.82 0.90

R&M Cost 3.56 5.34 7.13 10.69 10.69 10.69 10.69

Insurance of grain 1.25 1.41 1.63 1.89 2.19 2.54 2.78

Insurance of Assets 1.00 1.13 1.30 1.51 1.75 2.03 2.22

Railway Siding and other Expenses 1.87 2.03 2.24 2.47 2.73 3.01 3.20

Miscellaneous Expenses 0.90 0.97 1.08 1.19 1.31 1.45 1.54

Sub- total (Rs. in million) 13.30 16.46 20.15 26.00 28.74 32.03 34.32




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6.6. Projected Profitability

Years

Particulars 1 5 10 15 20 25 28

Revenues

Rev from Silos 31.01 44.23 53.85 65.59 79.95 97.52 109.91

31.01 44.23 53.85 65.59 79.95 97.52 109.91

Expenses

Operation & Management expenses 13.30 16.46 20.15 26.00 28.74 32.03 34.32

EBITDA 17.71 27.78 33.69 39.59 51.20 65.48 75.58

Depreciation 19.60 19.60 19.60 19.60 19.60 19.60 19.60

Operating profit (EBIT) -1.88 8.18 14.10 19.99 31.61 45.89 55.99

Financial charges

Interest on Term loan 18.78 10.07 0.00

Interest on working capital 0.16 0.16 0.16 0.16 0.16 0.16 0.16

Sub Total 18.93 10.23 0.16 0.16 0.16 0.16 0.16

PBT -20.82 -2.04 13.94 19.84 31.45 45.73 55.83

Tax Calculation 0.00 0.00 2.98 11.33 16.35 21.81 25.50

PAT -20.82 -2.04 10.97 8.50 15.10 23.92 30.33

6.7. DSCR Calculation

The debt service coverage ratio is important to understand the financial strength of the project

to payback the banks financial charges over the period loan tenure. This ratio determines that

yearly cash flows generated from the project are sufficient enough to cater the principal

repayment and interest charges. Generally for infrastructure projects it should be more than

1.25.

DSCR Calculation FY1 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9

Cash Accrual -1.22 8.89 12.32 14.02 17.55 20.81 23.69 26.61 28.18

Interest on term loan 18.93 16.76 14.58 12.40 10.23 8.05 5.87 3.69 1.52

Sub Total 17.71 25.65 26.90 26.42 27.78 28.86 29.56 30.30 29.70

Repayment 19.79 19.79 19.79 19.79 19.79 19.79 19.79 19.79 19.79

Interest on term loan 18.93 16.76 14.58 12.40 10.23 8.05 5.87 3.69 1.52

Sub Total 38.73 36.55 34.37 32.19 30.02 27.84 25.66 23.49 21.31

DSCR 0.46 0.70 0.78 0.82 0.93 1.04 1.15 1.29 1.39

Avg DSCR 0.90




7 | P a g e

6.8. Cash Flows

Year -1 0 1 5 10 15 20 25 26 27 28

Rs. in million

Sources of cash (A)

EBITDA 0.00 0.00 17.71 27.78 33.69 39.59 51.20 65.48 68.71 72.08 75.58

Equity 38.52 68.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Term Loan Amount 54.25 123.88 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Grant 35.63 35.63

Total (A) 128.39 227.86 17.71 27.78 33.69 39.59 51.20 65.48 68.71 72.08 75.58

Application of cash (B)

Capital Expenditure 128.39 215.61 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Principal Repayment 19.79 19.79 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest payment (TL) 12.25 18.93 10.23 0.16 0.16 0.16 0.16 0.16 0.16 0.16

Taxation 0.00 0.00 0.00 0.00 2.98 11.33 16.35 21.81 23.00 24.23 25.50

Total (B) 128.39 227.86 38.73 30.02 3.13 11.49 16.51 21.97 23.16 24.38 25.65

CASH FLOW

Opening Balance 0.00 0.00 0.00 -45.16 -27.28 113.98 266.77 456.99 500.50 546.06 593.75

Addition Net (A-B) 0.00 0.00 -21.01 -2.24 30.56 28.10 34.70 43.51 45.55 47.69 49.93

Closing Balance 0.00 0.00 -21.01 -47.40 3.28 142.07 301.47 500.50 546.06 593.75 643.68




8 | P a g e

6.9. Financial Returns

Cash Outflows Rs. in million

-1 0 1 5 10 15 20 25 28

Capital Investment 128.39 156.61 0.00 0.0 0.0 0.00 0.0 0.0 0.0

Net cash Outflows 128.39 156.61 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cash Inflows

PAT -20.82 -2.04 10.97 8.50 15.10 23.92 30.33

Depreciation 19.60 19.60 19.60 19.60 19.60 19.60 19.60

Interest (1-tax rate) 12.38 6.69 0.10 0.10 0.10 0.10 0.10

Net Inflows -1.22 17.55 30.56 28.10 34.70 43.51 49.93

Net cash flows -128.39 -156.61 -1.22 17.55 30.56 28.10 34.70 43.51 49.93

Cash Out Flow

Equity outflow 38.52 68.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net cash out flow 38.52 68.36 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cash Inflow -1 0 1 5 10 15 20 25 28

PAT -20.82 -2.04 10.97 8.50 15.10 23.92 30.33

Depreciation 19.60 19.60 19.60 19.60 19.60 19.60 19.60

Less TL repayment Installment 19.79 19.79 0.00 0.00 0.00 0.00

Net cash inflows 0.00 0.00 -21.01 -2.24 30.56 28.10 34.70 43.51 49.93

Net cash flow -38.52 -68.36 -21.01 -2.24 30.56 28.10 34.70 43.51 49.93

Project IRR 30 years 6.78%

Equity IRR in 30 years 8.74%

NPV 30 years (Rs. in million) -99.24




6-9 | P a g e

6.10. Sensitivity Analysis

Case 6: Sensitivity of IRR, NPV, DSCR vs. Variation in Project Cost Variation in project cost (capex) 80% 90% 100% 110% 120%

Project Cost 285.26 320.76 356.25 391.75 427.24

Project IRR 9.18% 7.96% 6.78% 5.98% 5.17%

NPV (Rs million) -36.94 -66.47 -99.24 -127.82 -159.13

Equity IRR 12.26% 10.44% 8.74% 7.62% 6.52%

DSCR 1.15 1.01 0.90 0.80 0.72

Rs. in million

Case 1: Sensitivity of Project IRR with respect to concession period

-0.38%

4.34%

5.50%

6.78%

-99.24

8.74%

Case 2: Sensitivity of Project NPV vs VGF and Constant Discount Rate

DiscountRate

-99.24 11.09%

5% -158.22

10% -137.94

15% -118.38

20% -99.24

Case 3: Sensitivity of Project NPV vs VGF and Discount Rate

-99.24 10% 11% 12% 13%

5% -141.76 -157.00 -169.32 -179.26

10% -121.01 -136.68 -149.43 -159.79

15% -101.06 -117.09 -130.19 -140.90

20% -81.58 -97.92 -111.34 -122.37

Case 4: Sensitivity of Project NPV vs VGF and escalation of Charges as per WPI and CPI

-99.24 4% 4.50% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5%

5% -224.74 -209.47 -193.29 -175.88 -158.22 -141.93 -126.59 -111.69

10% -203.64 -188.40 -172.25 -154.90 -137.94 -122.52 -108.03 -94.197

15% -182.69 -167.48 -151.36 -134.14 -118.38 -103.76 -89.83 -76.829

20% -161.90 -146.74 -130.63 -114.15 -99.24 -85.47 -72.59 -59.825

Case 5: Sensitivity of Project NPV vs VGF and Interest Rate on Term Loan

-99.24 10% 11% 12% 13%

5% -151.44 -158.22 -165.06 -172.59

10% -132.43 -137.94 -144.15 -150.41

15% -113.67 -118.38 -123.41 -129.04

20% -95.03 -99.24 -103.47 -107.86

Project IRR 15 years




Project NPV 30 years (Rs. in million)

Equity IRR 30 years

V

G

F

Interest rate on term Loan

V

G

F

Variation in Indexataion of WPI and CPI

V

G

F

V

G

F

Variation in Discount rate




6-10 | P a g e

Case 6a: Sensitivity of IRR, NPV, DSCR vs. Variation in O&M cost

Variation in O&M Expenses (Opex) 80% 90% 100% 110% 120%

Project IRR 7.79% 7.34% 6.88% 5.93% 5.06%

NPV (Rs. million) -77.58 -87.31 -97.32 -128.87 -148.77

Equity IRR 10.19% 9.54% 8.88% 7.55% 6.36%

DSCR 0.99 0.95 0.90 0.80 0.71

6.11. Financial Viability and Sustainability

The option of no VGF is not viable since the project cash flows need to be strengthened in

form of VGF to payback financial charges (repayments of principal and interest)

The option of concession period less than 30 years is not viable factoring the inadequate

cash flows generated from the project to meet the financial obligations and to achieve the

targeted IRR of more than 12%. However if the concession period is reduced, in that case

more VGF sought by the private developer for financial sustainability. Hence it is in better

to have 30 years concession period factoring the financial viability of the project as well as

machinery life of the project

The option of VGF about 40% of the total estimated project cost makes the project

somewhat viable and financially sustainable based on the capital investment required for

the project.

Sensitivity Analysis shows that both increase in project cost by 20% and increase in O&M

expenses by further 20% make the project unviable. However any reduction in the

estimated project cost will improve the financial viability of the project considering the

Case 7: Sensitivity of Project IRR vs VGF and escalation of Charges as per WPI and CPI

9.16% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%

5.00% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16%

10.00% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16%

15.00% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16%

20.00% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16% 9.16%

Case 8: Sensitivity of Project IRR vs VGF and Interest Rate on Term Loan

9.16% 10% 11% 12% 13%

5% 9.16% 9.16% 9.16% 9.16%

10% 9.16% 9.16% 9.16% 9.16%

15% 9.16% 9.16% 9.16% 9.16%

20% 9.16% 9.16% 9.16% 9.16%

Interest rate on term Loan

V

G

F

Variation in Indexataion of WPI and CPI

V

G

F




6-11 | P a g e

fixed revenues linked with the total capacity of the silos, hence there is an opportunity for

the developer to optimize the project cost subject to the specifications mentioned in the

concession agreement, which will help in to achieve better margins from the project over

the years.

In base case the DSCR (Debt Service Coverage Ratio) of the project is 0.90 which is not

within the acceptable limits assuming the maximum 20% VGF for the project. Therefore

the project is not financially viable if the VGF is capped to maximum 20% of the total

estimated project cost, hence around 40% of the VGF is required on the basis of estimated

project cost. However any reduction in capital investment will improve the financially

viability which will decrease the percentage of VGF required for the project. In the PPP

model, there is flexibility to the developer to optimize the project cost subject to the

meeting of standard output levels framed in the concession agreement. Therefore that part

will be reflected in their financial proposal based on the market scenario.

food corporation of india (fci) srei infrastructure...

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