Adani to quadruple grains storage business

The Adani Group is planning to more than quadruple its grains storage capacity by setting up ultra-modern silo-type facilities that can hold 2 million tonnes.

This is over and above its current capacity to store 600,000 tonnes through state-of-the-art
silos.

Adani also has the largest storage capacities in the private sector for edible oil and crude oil at Mundra in Gujarat.

India produces about 170 million tonnes of grains (rice and wheat, not counting cereals and pulses), while it has a capacity to store only 63 million tonnes - the prime reason why the government is desperate to ramp up.

A scathing Supreme Court recently lambasted the government’s inability to store the grains it procured, and allowing it to rot.

At a ballpark cost of around Rs5,000 per tonne, the Adanis would need to invest `500-600 crore if not more to set up the additional capacity of 2 million tonnes, said sources familiar with the development.
Sources in the ministry of agriculture have already begun talking about creating at least 15 million tonnes of capacity this financial year itself, of which 2 million tonnes would be of the silo type.

The Adanis set up their 600,000 tonne capacities in the earlier part of this decade when they won an open global tender floated by the Food Corporation of India (FCI), the wholly government owned enterprise.

“Adani Grain Logistics (a part of Adani Logistics Ltd), which operates several grain storage facilities in India, has implemented an automated, radio frequency identification or RFID-based system for receiving, testing and tracking foodgrains harvested in Haryana and Punjab. The system was tested in April 2007 and deployed three months later at two depots in Kaithal and Moga. Both are owned by FCI, which outsources it to Adani,” said sources familiar with the development.

In September 2010, at least a month before the new Warehousing Development Regulation Act was promulgated, the Adanis were in discussions with the FCI to set up an additional 2 million tonnes of storage for the government.

Such a move made sense because it would further integrate the Adani’s port operations (its Mundra Port has handled some of the largest volumes of grain imports on behalf of the government of India during the past decade).

The Adanis have already invested in creating storage depots along a dedicated railway route connecting the Mundra Port to the northern hinterland.

But because the deal is likely to be backed by the FCI’s own commitment of use, and also because FCI is a government entity, it is reasonable to expect a tender seeking bids to set up the capacity.

The Adanis would be frontrunners in this because of their experience, said sources, but it would not be won without a contest.

That’s because other private groups such as the two warehousing subsidiaries of NCDEX and MCX — National Bulk Handling Corporation and National Collateral Management Services Ltd - would be bidding, according to sources.