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The Food Corporation of India (FCI) will soon invite bids for the construction of 249 silos for the storage of wheat across the country at an investment of about 12,000 crore, two government officials said. The silos, which are to be built under the public-private partnership (PPP) mode, are expected to provide a fillip to private sector investment in developing India’s foodgrain storage infrastructure.

In a departure from an earlier proposal, there will be no restriction on the number of projects a single company or consortium could be awarded.

According to the officials cited earlier, who spoke on the condition of anonymity, the bidding will happen in three phases, and in the first phase, there will be no restriction on the number of bids private investors can place. The plan is being finalized by the ministry of consumer affairs, food and public distribution, in consultation with FCI.

Currently, FCI stores the foodgrain it procures in its own warehouses.

Earlier, the plan was to restrict a single company, group of bidders, or consortium to maximum of 15% of the location or 15% of the storage capacity, whichever was less. However, at a recent meeting called by the food ministry secretary with its own officials and FCI, it was decided to divide the entire bidding for 249 silos into three phases, without any restriction on single entity/ consortium bids in the first phase. Mint has reviewed the minutes of the meeting.

Officials indicated that decisions taken at the meeting have been approved and may be included as part of the tender document.

An email sent to the ministry of consumer affairs, food and public distribution remained unanswered.

The government believes that there is no need for caps at the initial phase of bidding, as this is still a fledgeling model. Also, 8-10 silos are being already operated by private entities, and sometimes, even smaller players have outbid established players.

However, without restrictions, some experts fear the move could result in control and concentration of such critical infrastructure in the hands of a few entities.

As per the minutes of the meeting, a decision on putting restrictions on single-entity bids for silo projects proposed to be developed under the hub-and-spoke model will be taken only when bids are invited in the second and third phases. This will be done only if the move promotes competition and brings about cost effectiveness, and only after watching the trend in control and concentration.

The Union government has made an action plan for the construction of steel silos on PPP across the country. So far, silos with a capacity of 2.975 million metric tonnes (mt) at various locations throughout the country have been awarded, of which 1.0625 million mt is complete, and the rest is under various stages of development. A high-level committee has recommended a total of 249 locations with a capacity of 10.8375 million mt in a hub-and-spoke model across the country. The FCI is expected to invite bids for these now.

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