Food companies cheer govt’s move to boost food storage capacity

The Indian FMCG industry has heartily welcomed the Union government’s announcement on Wednesday that promised a Rs 1 lakh crore-project to ramp up India’s food storage capacity to 2,150 lakh tonnes over the next five years.

Industry insiders unanimously agreed that a higher storage capacity across multiple locations in the country will ensure stability in supply and thereby prices, enabling companies to bring down their provisioning corpus (usually matched to rate of inflation) set aside for periods of sudden price spikes.

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“FMCG companies always want stability in their input material (prices) because unexpected hikes or softening in commodity prices affect our business decisions badly as our plans go for a toss,” explained Siddharth Saxena, chief procurement officer of ready to cook product brand iD Fresh.

“When prices don’t fluctuate much, it is much easier for us to pass on the net benefit to consumers,” added Kush Aggarwal, who heads marketing at snacks and packaged food manufacturing company Bikano.

Dubbed as the world’s largest food grain storage programme the project will add 700 lakh tonnes of storage capacity – with every block having a 2,000-tonne facility – in the cooperative sector to add to the current capacity of 1,450 lakh tonnes.

According to United Nations Environment Programme’s Cool Coalition, farmers in India incur nearly $12,520 million in post-harvest losses annually due to inadequate storage facilities and a lack of energy infrastructure. The project holds promise of significantly reducing foodgrain wastage.

“The enhanced storage conditions will effectively prevent damages and losses at storage points while also enabling proximity to markets,” attested Vijay Kumar Singh, managing director of SAJ Food Products, the manufacturers of Bisk Farm brand of biscuits.

Empowered by the longer shelf life their products will gain with the storage facilities coming, it is expected that they would have a better bargaining power to command higher prices, with lesser instances of distress selling. On the flip-side, an improved supply situation could also moderate prices. This calls attention to what it augurs for the costs FMCG companies incur.

“For food companies, local procurement prices could go up gradually as more farmers supply to co-operatives and other government procurement agencies. However, in a global economy, many of these companies procure supplies from across the world driven by quality and cost dynamics. To that extent, their overall procurement pricing will be driven by prevailing market demand and supply considerations,” explained Akshay D’Souza, chief of growth & insights at retail intelligence firm Bizom.

“It may not have a significant impact on the edible oil industry,” said Gokaran Singh Pawar, National Sales Head, Sunpure, as the segment relies heavily on imports for the popular sunflower, palm and soybean categories of edible oil. Furthermore, other crucial factors such as monsoon showers, climate change, import/export policies, et al, shall continue to play their part, he warned.