July 23, 2010

 

India considers tax incentives to boost grain storage space

 

 

India is mulling tax breaks and other incentives to persuade private investors to build grain warehouses, after a crunch in storage space is forcing the country to store grain reserves in the open, according to a senior government official.

 

The country's total grain stocks, including wheat and rice, have bulged to more than double of the buffer stock requirements as the government paid high state-fixed prices to farmers to ensure supplies do not run out in case of a drought for a second year running.

 

"A proposal to give a tax incentive for new storage space is being prepared and may go to a high ranking inter-ministerial panel for consideration soon," said the food ministry official, who did not want to be identified.

 

State-run agencies have a total storage capacity of around 42 million tonnes, but India immediately needs an additional 14 million tonnes. According to government's estimates, around INR40 billion (US$850 million) will be required to build these new warehouses.

 

Until now the government has been running most of India's storage space but it has recently started hiring space from private warehouses.

 

The official said the private players could get a tax rebate, or tax holiday, on income for a certain time by renting out storage space to state-run agencies.

 

State agencies are storing sacks of grain covered with thin plastic sheets in open fields in the absence of adequate storage space. Heavy showers have already washed away some of the stocks in the open and rains in the coming days may spoil even more of the stored grain.

 

State and national government officials have realised the pressing need for storage. Punjab has recently invited tenders for the construction of facilities.