Enhancing Foodgrains Storage Infrastructure in India

India produces more than 350 million tonnes of foodgrains every year, but growing the grain is only half the battle. Keeping wheat, rice, and pulses safe from pests, rain, rodents, and rot until they reach ration shops is an equally massive task. This is where the country’s foodgrain storage infrastructure comes in – a sprawling network of godowns, warehouses, and modern silos that keeps the central pool stocks in good condition and ensures that welfare schemes like the Public Distribution System never run dry.

Why storage matters as much as production
The Food Corporation of India: the backbone of the system
Covered godowns vs Cover and Plinth storage
Partnerships with the Central Warehousing Corporation and state agencies
How hired capacity works
The Private Entrepreneurs Guarantee (PEG) scheme
Why PEG worked
Modern steel silos: the shift to scientific storage
Advantages of steel silos over conventional godowns
The hub-and-spoke model
Other complementary schemes
Smart warehouses and the road ahead
What do you think?

Why storage matters as much as production

A bumper harvest means little if the grain spoils before it can be eaten. Storage directly shapes food security, farmer incomes, and consumer prices. Poor storage leads to post-harvest losses, distress sales during glut seasons, and shortages during lean months. Strong storage, on the other hand, allows the government to hold buffer and strategic reserves, stabilise market prices, and meet the needs of roughly 81 crore people covered under the National Food Security Act, 2013.

According to official estimates, the overall storage capacity required for central pool foodgrains during peak procurement is about 650 Lakh Metric Tonnes (LMT). Thanks to sustained investment over the past two decades, the combined capacity with the Food Corporation of India, the Central Warehousing Corporation, and state agencies has grown well beyond this benchmark. As of mid-2025, the FCI and state agencies together managed about 917.83 LMT of covered and Cover and Plinth (CAP) storage capacity.

The Food Corporation of India: the backbone of the system

The Food Corporation of India, set up in 1965, is the single most important agency handling central pool grains. It procures wheat, paddy, and rice at Minimum Support Price, maintains buffer stocks, and issues grain to state governments for distribution through ration shops and welfare schemes.

To store these enormous quantities, the Food Corporation of India runs over 2,500 godowns across various states, with its own storage capacity crossing 482 lakh metric tonnes as of November 2024. These godowns are not just warehouses. They are scientifically managed facilities where grain is stacked on wooden crates, treated with fumigation, and regularly inspected for moisture, pests, and temperature changes.

Covered godowns vs Cover and Plinth storage

The storage network is broadly divided into two types. Covered godowns are permanent warehouses with roofs and walls, and they form the bulk of the system. Cover and Plinth (CAP) storage is essentially open-air storage where bags of grain are stacked on raised concrete plinths and covered with polythene sheets. CAP is cheaper and faster to set up, but it exposes grain to rainfall and temperature swings, leading to higher losses.

The risks are real. Haryana government figures showed that 44,700 MT of wheat stored in open plinths was spoiled in the 2018-19 and 2019-20 periods due to excessive rainfall. Recognising this, the government has been actively phasing out CAP storage in favour of covered godowns and modern silos.

Partnerships with the Central Warehousing Corporation and state agencies

The FCI does not work alone. It partners with the Central Warehousing Corporation (CWC), a statutory body set up in 1957, and with State Warehousing Corporations (SWCs) across the country. These agencies own and operate their own godowns, and FCI hires capacity from them whenever additional space is needed during peak procurement.

This layered arrangement offers flexibility. When wheat procurement peaks in April and May in Punjab and Haryana, or when paddy procurement swells in Chhattisgarh and Odisha, FCI can quickly hire space from CWC and SWC godowns instead of scrambling to construct new facilities. The CWC and SWCs also store commodities beyond foodgrains – seeds, fertilizers, cotton, and industrial goods – which means their warehouses remain productive even during lean grain seasons.

How hired capacity works

FCI pays storage and maintenance charges at rates decided by the government. For private godowns hired under schemes like PEG, the hiring rates are decided through a transparent two-bid tendering process, kept within approved CWC rates indexed appropriately. This keeps the system financially disciplined while still giving the corporation the space it needs.

The Private Entrepreneurs Guarantee (PEG) scheme

Perhaps the most important structural reform in foodgrain storage came in 2008 with the launch of the Private Entrepreneurs Guarantee (PEG) scheme. Until then, the government had to fund new godown construction itself, a slow and capital-intensive process. The PEG scheme flipped this model by bringing private capital into warehousing.

Under PEG, private investors, the CWC, and State Warehousing Corporations build godowns on their own land with their own money, while FCI guarantees to hire them for a fixed period. The Food Corporation of India guarantees to hire godowns built under the scheme for a period of ten years, ensuring a fair return on investment for the private builder. This guarantee removes the biggest risk for private players – the fear of an empty warehouse – and has unlocked large-scale private investment.

The scheme was initially rolled out in non-DCP (Decentralised Procurement) states and later extended to DCP states. The impact has been significant. Construction of godowns under the PEG Scheme has been undertaken across 24 states, creating a capacity of 144.06 LMT by November 2020.

Why PEG worked

The scheme succeeded for three practical reasons. First, the government did not have to allocate budget for construction – private parties arranged their own funds and land. Second, the guaranteed long-term hiring made the investment bankable, so private entrepreneurs could raise loans easily. Third, the transparent tendering process prevented inflated rental rates and kept the public exchequer protected.

Modern steel silos: the shift to scientific storage

The next leap in foodgrain storage has been the move from traditional bag-based godowns to bulk storage in modern steel silos. A silo is a tall cylindrical structure, usually made of galvanised steel, where grain is poured in loose rather than stacked in bags. It looks more like an industrial facility than a conventional warehouse – and that is exactly the point.

In 2014, the Government of India approved an action plan for construction of steel silos with a capacity of 100 LMT in Public Private Partnership (PPP) mode, aimed at modernising storage infrastructure and improving the shelf life of stored foodgrains. The idea was to replace old jute-bag godowns with mechanised, airtight silos that require less land, less labour, and offer far better grain quality.

Advantages of steel silos over conventional godowns

Steel silos bring several concrete benefits over traditional storage. Being a closed system, silo storage keeps grain storage losses below 0.5 per cent, while silos can be mechanised to handle grain at speeds of up to 700 tonnes an hour. This is a dramatic improvement over manual bag handling, where labour shortages routinely slow down loading and unloading.

Silos also use aeration systems to control temperature and moisture, thermal probes to monitor hot spots, and closed-loop fumigation to control pests without exposing workers to chemicals. Some of the newer silos even have carbon dioxide monitoring, which gives an early warning of insect activity. Land requirements are also smaller – silos occupy roughly a third of the footprint of a conventional godown of equivalent capacity.

The Food Corporation of India estimates that the use of scientific storage practices could reduce total grain loss by about six per cent, saving around Rs 1,350 crore every year and making an additional nine million tonnes of foodgrain available for public consumption.

The hub-and-spoke model

To get the most out of silo investments, FCI is adopting a hub-and-spoke logistics model. Under this design, a central “hub” silo is built at a major junction with direct rail connectivity, while smaller “spoke” silos feed into or draw from the hub via road. This allows bulk movement of grain by rail between major nodes, cutting transit costs and reducing the handling losses that occur every time bags are loaded and unloaded.

Progress on the silo programme has been steady. Modern steel silos with a capacity of 27.75 LMT have been completed at 48 locations, while another 36.875 LMT is under construction at 87 locations. Tenders for additional capacity are in the pipeline, and pilot projects are testing the storage of milled rice in silos, since rice handling in bulk is more sensitive than wheat.

Other complementary schemes

Alongside PEG and the silo programme, the government runs a Central Sector Scheme for storage, which funds godown construction in the North Eastern states, Himachal Pradesh, Jharkhand, and Kerala – regions where private players may not find the economics attractive. A Private Warehousing Scheme (PWS) also allows FCI to hire additional space for short-term needs once all CWC, SWC, and PEG capacity has been exhausted.

More recently, the government launched what it calls the World’s Largest Grain Storage Plan in 2023, focused on decentralised storage through Primary Agricultural Credit Societies (PACS). The idea is to build village-level godowns of 500 to 2,000 metric tonnes so that farmers can store their own grain closer to home, avoid distress sales, and get better prices.

Smart warehouses and the road ahead

Storage infrastructure is also going digital. The Department of Food and Public Distribution is converting 150 FCI-owned depots into smart warehouses on a pilot basis – equipped with sensors, automated inventory systems, and real-time monitoring dashboards. The aim is to move from paper-based stock registers to a data-driven system where every bag can be tracked from procurement to distribution.

Challenges remain. Regional imbalances mean some states still face storage shortages during peak procurement while others have surplus capacity. Land acquisition for new silos continues to be slow, and the high cost of galvanised steel affects project viability. Coordination between the Centre, state agencies, and private operators needs constant attention to keep the system running smoothly.

Still, the direction is clear. From sacks piled under plastic sheets to airtight silos monitored by sensors, India’s foodgrain storage story is one of steady, if uneven, modernisation. The mix of public infrastructure, guaranteed-hire private investment, and scientific storage technology is gradually building a system that can match the scale of Indian agriculture.

What do you think?

What do you think? Should the government aggressively phase out all Cover and Plinth storage within the next five years, even if it means higher costs in the short run? And with private investment already driving much of the new capacity under PEG, where should the line be drawn between public control and private participation in something as sensitive as the nation’s food reserves?

References

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Table of Contents

Why storage matters as much as production 🔗

The Food Corporation of India: the backbone of the system 🔗

Covered godowns vs Cover and Plinth storage 🔗

Partnerships with the Central Warehousing Corporation and state agencies 🔗

How hired capacity works 🔗

The Private Entrepreneurs Guarantee (PEG) scheme 🔗

Why PEG worked 🔗

Modern steel silos: the shift to scientific storage 🔗

Advantages of steel silos over conventional godowns 🔗

The hub-and-spoke model 🔗

Other complementary schemes 🔗

Smart warehouses and the road ahead 🔗

What do you think? 🔗