Wednesday, February 15, 2012

Why Grain Elevators are needed in India


On December 26th 2003, Iran suffered a devastating earthquake in Bam. An entire ancient settlement was flattened to the ground and the causality count was in the region of 43,000 dead, 30,000 injured and over 70,000 rendered homeless. Iran, normally a very insular nation, appealed to the world for assistance, seeking food, medicines and emergency shelter aid. India decided to send two ship loads of Indian wheat from the FCI Godowns. What transpired later was one of the most embarrassing moments for India in recent history. Iran, even in that desperate situation, was forced to reject the wheat aid on account of the ‘non biological’ content being higher than WHO norms.

The reasons for this situation

Even though India has achieved the Green Revolution in some of the irrigated areas in the nation, and we manage to grow sufficient grain to feed our burgeoning population, there seems to be some short comings too. While the planting and the fertilization processes are managed using modern methods and a high degree of mechanization can be seen, the fault-lines lie largely in the post growing phase.

Typically, the grain is harvested manually and stored in bushels on the field during the scything process, and at the end of day, all these are transferred onto a collection yard and stored in large mounds. Even if the grain is harvested mechanically, the ultimate storage of the stalks would typically be on the ground, with minimal protection. The stalks are allowed to dry here and are subject to rodent, cattle and pest attacks. Once dry, the threshing, winnowing and bagging of the grain are carried out using either manual or mechanical means, but the grain is always in contact with the ground, which sometimes is not even paved. Thus, it is in this post growing phase that our grain collects all the negative parameters leading to their categorization as ‘poor quality’

Subsequent to this stage, the grain is transported in open trucks and unloaded on the floors of open-air markets, walked upon by hundreds of buyers, sellers and laborers and finally end up in poorly designed and abysmally constructed godowns of the government agencies, or those of private merchants. Recent news reports have shockingly exposed that thousands of tons of grain have fallen prey to humidity damage, rodent attack and general degradation. It is little wonder that grain that is drawn from such storage will fail the most basic of tests – the one that certifies it to be ‘fit for human consumption’. While the grain that is grown with such care (Indian farmers are among the most dedicated and hard-working) should ideally be fit for the definition ‘prime grain’. However we face this sorry and somewhat agitating situation.

The possible solution that needs to be explored

Every growing district in the country needs to have investment in the setting up of Grain Elevators / Processors which would be large stainless steel structures that are designed according to the complexity of the crops grown. Typical storage requirements would include first-in-first-out storage, storage of grains of different vintage separately; multiple storage compartments to ensure that grains of different grades are not mixed, and in the most advanced stage, grains grown by different farmers can be stored and accessed separately. Typical Technical requirements would require this to be 100% humidity proof, rodent and insect proof, completely mechanized input and output, so that there is no human contact, and finally, the entire elevator shall be climate controlled (using solar power if feasible, considering the poor power supply situation in the nation), in order that the temperature and the humidity inside the elevator is controlled such that the best quality parameters can be achieved upon the grain drying and becoming ready for withdrawal.

This needs to reach out to the farmers directly

One possible scenario is to have farmers who are members or users of the grain elevator who would request the operators to come and harvest their crop once it is ready. The harvesting shall be carried out using 100% mechanical means, and in large holdings, combine harvesters that cut, thresh and winnow the grain and collect them in a truck for transport can be used, or more appropriately, for the small sized Indian farm holdings, a pedestrian operated solution needs to be developed. In either of the means, the grain shall never be permitted to have any contact with the soil or the ground, and shall be weighed and lifted into the grain elevator using conveyor belt methods. Once the grain is inside the grain elevator, it would be totally safe until it is ready / dry enough to be sold.

Benefits of this facility to the farmer

The benefits to the farmer are apparently limitless. All the concerns that are faced by them today will be completely negated if such a facility is provided. They will be able to achieve almost 100% harvest efficiency and also get the best prices for their grain as it would now qualify for higher grade parameters. The farmer will also have the ability to hedge his crop and depending on the market price, decide to hold or sell at a particular time, even permitting him to decide if he wants to clear all his stock or do so only partially.

Revenue Model for the investor

In the event that the investor is the Government, then the benefits are enormous. They can acquire grain directly from the growers and also store the same in safe and sound manner leading to a dramatic improvement in the food security situation in the nation.

If the investor is a farmers cooperative or an NGO, then the cooperative can charge its members, service charges for the activities rendered, while also taking a percentage of the selling price when a member off loads his stock. The idea of course, would be based on the ‘no profit – no loss’ philosophy.

If the investor is a private enterprise with food manufacturing or exporting interests, this will be the best way to get access to the finest grain at the most appropriate price. Stocks can be built up to cover requirements of the subsequent buying year and hence insulate the company against a shortage situation arising out of monsoon failure, etc. If the investor has no forward integration interests, then too, he will have the opportunity of playing the role of the cooperative and / or the government and still see healthy returns in the medium term.

Other additional features that can be added on to increase the revenue stream

•  Provision of Cold Storage facilities in the same premises. 

• Dairy / Milk collection and storage facility can be incorporated. Conversely, spare land of suitably located Dairy Collection Centers can be used to create this facility.

• Stocking and sale of Fertilizers, Insecticides, Farm Implements, and other similar product lines.

• Micro Banking facilities / ATM’s to provide farmers the ability to take loans and also draw (monetize) in cash on their stock held in the grain elevator, for a fee.

• Offering of farm consultation services on cropping, sowing, crop care and others. Availability of expertise will not be a contsraint.

• Creation of a pool of modern farming and harvesting tools and mechanical implements that can be hired by farmers or collective. This ensure access to contemporary equipment at low involvement level for the farmer.

• Small retail facilities where the basic needs can be purchased, something along the lines of a Convenience Store, but can be enlarged to carry Apparel, Electronics and Consumer Durable's if the market so develops.

• Offer a place of meeting or social gatherings to conduct small family gatherings etc.

• The other opportunities are seemingly limitless and need to be explored. Farmers themselves would have ideas on what services they would like.

Others / General

A detailed study of the cropping patterns and the storage complexities need to be instituted. Grain value increases with age and hence this factor needs to clearly addressed, so that best prices can be achieved. Further, grains of different variety are grown on the same land during the different growing seasons, so such complexities need also be factored in. Finally, and perhaps most the challenging, one needs to size the grain elevator right. Too small and it will be overwhelmed in a couple of seasons, and too large will result in longer break-evens.

A team of agricultural scientists, engineers, merchants, farmers and business teams needs to be formed and detailed feasibility studies need to be undertaken. One dreams of the day when each district in each state has at least one grain elevator, a dream that has the possibility of contributing enormously toward poverty alleviation and abatement of hunger in this nation.

Needless to say, efforts need to be made to attract the best talent to manage and operate this facility. Thus, comfortable living quarters, medical facilities and remunerative salaries to the Agricultural Graduates and Engineers required to maintain this facility will be essential.

Additional reading:

India wastes about Rs 13,300 crore worth fruits, vegetables in a year: report

Storage insects and their management

Insect damage to farm-stored grain

F.D.A. Finds 12% of U.S. Spice Imports Contaminated - India has been named as one of the supplier markets where this problem is prevalent.


  1. Mail written to International Centre for Trade and Sustainable Development –
    Agriculture Advocacy / Agriculture Program Team member, Mr. Jonathan Hepburn.

    On 20 April 2012 13:48, wrote:
    Subject: My blog on Agricultural Infrastructure in India

    Dear Jonathan,

    I read the note 'Ensuring trade policy supports food security goals' and thought it would be a good idea to bring to your attention one of my concerns about the state of agriculture and its impact on the food security of 1.2 Billion people of India.

    While you have dealt in some detail the impact of international trade on food security, I write this mail to draw your attention to the fact that India suffers from an indifferent food security situation due to its own internal policies. The Government has invested close to nothing in agricultural infrastructure, spent billions in fertilizer, power and loan subsidies, done nothing to encourage cold chains or other farm-to-fork initiatives due to which, the Indian farmer is stuck in the middle ages in terms of techniques, output and quality of produce. The recent cancellation of the policy permitting Foreign Direct Investment in Multi Brand Retail, which should have spurred the country to modernize, but the opportunity being lost due to politics is a case in point.

    While I am not an expert in agriculture and am an Engineer by training and Retailer by profession, I do feel strongly that India has the potential to become one of the leading food producers of the world, if the right policy initiatives are taken up. Please visit my blog post on this subject at to get my perspective of the problem. I do hope you will be able to initiate some pressure inducing mechanisms that will make the Indian Government think along more contemporary policy lines. Pressure from reputed think tanks should make this happen and I look forward to some India specific initiatives in the near future.

    Thanking you in anticipation,

    Hemanth Sharma

    Sent from my Nokia phone

    From: Jonathan Hepburn
    Sent: 20/04/2012 19:33:49
    Subject: Re: My blog on Agricultural Infrastructure in India

    Dear Hemanth,

    Thank you for your message. I'm glad to hear you found our briefing note interesting. I agree with your assessment that international trade policy measures to support food security outcomes would need to be complemented by a number of measures at the national level as well. We did not go into these in great detail in this particular paper, as they were somewhat beyond the scope of the issues that the briefing note sought to address.
    However, we do hope to conduct further analysis in this area in the coming months, including in India, and we shall certainly make this available as soon as it is published.

    I read your blog post with interest. While the questions you raise also mostly go beyond the immediate issues we mostly focus on, which are to do with the relationship between agricultural trade policy and sustainable development, I was interested to read your reflections on what could be done in improving farm infrastructure, and the role this could play in reducing post-harvest losses.

    Thank you again for your interest in our work, and for taking the time to draw our attention to your blog post.

    Best regards,


    read this article and the grain elevator seems to make so much sense...

    1. Hi Sandhya,

      I'm glad you see my point.

      What FCI typically does is, it acquires large stocks of grain (grain that has already been rendered somewhat degraded due to inefficient harvesting, drying and transportation during which the grain lies on the ground and picks up all the non-biological content and pests), sacks them and stores them Centrally in warehouses that have not been specifically designed for grain storage, which ideally requires humidity controlled and sealed environments, due to which pest, rodents and humidity attacks wreak havoc on the nation's food security. It is downright silly to even procure grain from the farmers in excess of the storage capacity of FCI. Unfortunately, such unplanned and unnecessary acquisitions are undertaken on account of vote-bank politics, not good agricultural / food policy or good economics.

      Instead, if we can set up hundreds of humidity controlled Grain Elevators that provide first grade protection against all the degrading factors, replacing the few Grain warehouses of FCI, the quality of storage, the quality of grain and the efficiency of the entire process will be so much better. I do hope someone in the Government will take note at the earliest and spare us from reading such depressing stories in the news.