4.    STORAGE LOSSES

4.1    One of the important elements in the economic cost of foodgrains is the value of foodgrains lost during storage and transit. Foodgrains are lost at various stages starting with the procurement operations in the mandis, transportation through the length and breadth of the country, storage in various godowns which involves loading, unloading, stacking, destacking etc. and ends with issue to Public Distribution System. The extent of losses, both on account of storage and transit, amounted to Rs.813.21 crores in the last four years.

(Qty. in lakh MTs)

Year

Purchases 
Qty.

Sales 
Qty.

Total 
Qty.

Loss 
Qty.

% Loss on 
total

Value 
(in crores)

1990-91

235.19

182.55

417.74

4.60

1.12

Rs. 155.98

1991-92

194.01

226.25

420.26

5.90

1.42

Rs. 219.70

1992-93

225.73

191.60

417.33

5.02

1.21

Rs. 223.33

1993-94

263.60

198.70

462.30

4.20

0.95

Rs.214.20

 

Rs. 813.21

The above losses do not include losses on account of missing wagons and on account of deterioration in quality during storage.

4.2    Out of Rs.813.21 crores, Rs.280.42 crores relates to storage loss and Rs.532.79 crores to transit loss. According to a BICP report (June 1990), FCI has a poor record of fixing responsibility for storage losses & effecting recovery. In the absence of such a mechanism, the storage losses remained uncontrolled as evidenced by increasing losses, which went up from Rs.45.71 crores in 1990-91 to Rs.87.94 crores in 1993-94.

The Ministry intimated (January, 1995) that administrative authorities were initiating disciplinary action for high losses, wherever the situation so warranted. It also stated that cases of tranist losses were also enquired into.

4.3    The details of storage losses, during the last three years shown below, reveal an upward trend relative to average stocks held:-

(Lakh MTs)/(Rs.in crores)

Year

Qty.

Value

Average 
stock

Percentage 
of loss

1990-91

1.16

45.71

130.53

0.89

1991-92

1.78

73.17

124.58

1.43

1992-93

1.54

73.60

99.55

1.55

1993-94

1.56

87.94

168.30

0.93

There was an upward trend in losses relative to the average stocks held, except in 1993-94 when it came down as compared to the previous two years. Further, the storage losses in a depot are calculated only at the time of destacking and no loss is computed if the stacks are not killed.

The Ministry clarified (January, 1995) that the storage losses are determined at the time of sale and in years of higher sale higher storage loss would be recorded. Though this is broadly true, FCI lost 1.50 lakh MTs in the case of rice in 1993-94 against the issue of 94.9 lakh MTs as compared to the loss of 1.43 lakh MTs on a sale of 99.0 lakh MTs in 1992-93.

4.4    The storage losses were further analysed in terms of different grains since wheat gains weight during storage. The broad break-up of shortages, in the last four years, in terms of wheat, paddy and rice is given below:-

(Lakh MTss/Rs in Crores)

Commodity

1990-91

1991-92

1992-93

1993-94

Qty

Value

Qty

Value

Qty

Value

Qty

Value

Wheat

-0.24

-6.90

-0.09

-2.87

-0.13

-5.07

-0.30

-13.07

Paddy 
(in rice term)

0.37

14.71

0.30

12.64

0.24

12.14

0.36

21.46

Rice

1.03

37.90

1.57

63.40

1.43

66.53

1.50

79.55

Total

1.16

45.71

1.78

73.17

1.54

73.60

1.56

87.94

There was a significant increase in losses of rice in 1991-92 both in terms of quantity and value. The actual absolute losses would be even more if the gain made in weight by wheat during storage due to natural reasons is not considered .

4.5    The storage losses were analysed zone-wise and grain-wise. Since the storage capacity is minimum in the North-East Zone, it has been aggregated with that of East Zone in the following 3 tables:

Rice                                                                                                                                                                   (in tonnes)

 

1990-91

1991-92

1992-93

1993-94

North Zone

60312

83178

90640

89185

South Zone

14456

27039

13540

24876

West Zone

14557

26082

23943

19164

East Zone

13782

20468

14790

17226

Total

103107

156767

142913

150451

Paddy                                                                                                                                                                (in tonnes)

 

1990-91

1991-92

1992-93

1993-94

North Zone

36399

28020

24005

35253

South Zone

516

1260

453

478

West Zone

50

104

6

--

East Zone

187

549

143

136

Total

37152

29933

24601

35867

Wheat                                                                                                                                                                 (in tonnes)

 

1990-91

1991-92

1992-93

1993-94

North Zone

-31774

-19467

-14580

- 32559

South Zone

- 3771

- 2534

- 2556

- 2561

West Zone

- 3541

303

481

- 565

East Zone

14642

12902

3827

5672

Total

- 24444

- 8796

- 12828

- 30013

It was seen that during all the years, East Zone recorded maximum losses for wheat. Interestingly this has happened though wheat gains weight during storage and other regions generally showed gains.

In the case of rice, North Zone recorded an upward movement.

4.6    Food Corporation of India has fixed an All India norm of 1% loss for wheat, 1.5% for rice and 2.5% for paddy on quantities issued. Further, the Zonal Managers are to fix storage loss norms in respect of regions functioning under them and also for the various depots in different regions on the basis of past experience. These norms for regions and depots have not yet been fixed.

The Ministry intimated (January 1995) that there was an apprehension that if norms were fixed for shortages they would become bench marks and may lead to higher level of shortages.

4.7    A study of the storage losses in the last three years, region-wise, indicated that Bihar, Orissa and West Bengal in respect of wheat and Uttar Pradesh, Punjab, Gujarat, Orissa and Madhya Pradesh for rice had chalked up heavy losses. However, these losses were within the norms fixed by the Corporation.

Review of depot-wise losses showed that 52 different depots had reported losses in excess of 1% for wheat during the years 1991-92 and 1992-93. In these two years alone, 3091 MTs of wheat valued at Rs.103.44 lakhs was lost by these depots.

In the case of rice also, 349 depots had reported losses in excess of the FCI norm of 1.5% 182 depots had lost 69557 MTs in 1991-92 and 167 depots lost 35376 MTs in 1992-93 totalling a storage loss of Rs.45.15 crores.

4.8    The recoveries effected from millers/agents, handling and transport contractors, and officials, in respect of storage losses, in the last 4 years were as under :-

Year

Amount 
(Rs. in lakhs)

1990-91

86.32

1991-92

60.73

1992-93

67.65

1993-94

253.13

After adjusting the above recoveries, Rs.193.66 crores including shortages of earlier years remained unadjusted in the accounts. The details for last four years are as under: -

(As on 31.03.1994)

Lakh MTs/ Rs. in Crores.

Year

Total 
Shortages

Regularised

Pending 
Regularisation

Qty

Value

Qty

Value

Qty

Value

1990-91

1.16

45.86

1.15

40.97

0.01

4.89

1991-92

1.78

73.63

1.45

56.90

0.33

16.73

1992-93

1.55

74.40

1.07

48.70

0.48

25.70

1993-94

1.57

88.24

0.59

31.01

0.98

57.23

4.9    Some of the storage shortages are due to misappropriations and thefts which were on the increase in recent years despite a number of vigilance cases.

The value of foodgrains lost on account of misappropriation and theft amounted to Rs.154.73 lakhs in 1990-91, Rs.87.95 lakhs in 1991-92 Rs.91.54 lakhs in 1992-93 and Rs.290.38 lakhs in 1993-94 and form part of the total shortages.

The Ministry intimated (January 1995) that the percentage of loss was showing downward trend from 0.39% in 1991-92 to 0.37% in 1993-94 and that appropriate steps are taken to investigate and fix responsibility.

4.10    FCI loses substantial amounts as a result of fire accidents and other natural causes every year. The Corporation lost stocks of an estimated value of Rs.148.97 lakhs on this count during the five year period from 1989-90 to 1993-94 as shown below: -

(Rs in Lakhs)

Year

Loss

1989-90

35.00

1990-91

28.14

1991-92

NIL

1992-93

85.83

1993-94

NIL

4.11    Apart from shortages, thefts, misappropriation and natural calamities, poor storage management is also revealed by damage and deterioration to foodgrains stored. Stocks suffer losses due to controllable factors like inadequate prophylactic treatment, excessive stocks and absence of handling and transport contractors. Some cases of such losses above the norm are detailed below.

S. No

Name of
Depot

Period of
loss

Qty in
MTs

Value 
Rs. in lakhs

Percentage

Reasons

1.

Amadalvalsa
(A.P.)

1992-93

958

59.12

2.27

Poor prophylactic Treatment. Excessive stocks.

2.

Miryalguda
(A.P.)

1993-94

287

14.24

1.84

Non-availability of fumigants.

3.

Zangalapally
(A.P.)

1990-91

1043

34.67

1.91

Infestation. Long storage. Different modes of weighment.

4.12    Losses also occur due to poor quality foodgrains being despatched. To detect and rectify such cases, FCI has prescribed joint inspection by the consignor and consignee within 21 days of the assessment of the quality by the Quality Control division of the consignee. The sub-standard grain is to be disposed of and the final loss assessment statement should be completed within 10 weeks of the receipt of stock.

A few cases of non-observance of these procedures are detailed below:

i)    In April, 1987, 797.106 MTs of wheat in Sangrur depot was found to be heavily infested. Two attempts in March 1988 and May 1988 to dispose of the stock as cattle feed did not succeed since buyers did not find it fit even for cattle feed. The damaged stock was finally disposed of during 1988-89 and 1989-90 at a loss of Rs.12.18 lakhs. With a view to fixing responsibility, an inquiry was ordered (August 1988) and conducted in February 1989 i.e. after a lapse of one year. The inquiry report was considered incomplete and another inquiry was ordered after a delay of 2 years in March 1991. It is stated to be in progress (March 1994). Thus even after a lapse of 7 years, for a loss of Rs.12.18 lakhs no responsibility has been fixed.

ii)    Kurali storage depot (May 1990) despatched 11306 bags of common rice to Midnapore. Midnapore received only 10147 bags and the balance was received in Palghat, Kerala. The consignee complained about the sub-standard quality and filed provisional loss assessment statement. No joint inspection was conducted till June 1993. The consignee submitted a final loss assessment statement in September 1993 for Rs.11.01 lakhs. The carrying and financing cost for sub-standard stock till March 1994 was Rs.18.07 lakhs. The loss will go up if the loss on stock sent to Palghat is also taken into account. Besides, the system of joint inspection was not followed and responsibility for despatching substandard grain was also not fixed.

iii)    Similarly, Gorakhpur (U.P.) received from Machiwara (Punjab) 21990 bags of superfine rice weighing 2052 MTs on 23rd April 1991. Though a quality complaint was lodged on 26th April 1991, joint inspection has not taken place and the consignee has not prepared a Final Loss Assessment Statement. In the absence of Final Loss Assessment Statement no write off proposal could be processed, though more than three years have elapsed. According to the provisional Loss Assessment Statement sent in October 1991, the loss was Rs.84.13 lakhs.

iv)    A quantity of 3408 MTs rice received at Avadi in March and April 1992 from Moga, Punjab as sub-standard is still awaiting disposal incurring heavy carrying cost besides transportation cost of Rs.15.23 lakhs already incurred.

v)    948 MTs of superfine raw rice received at Dehradun from Kapurthala (Punjab) in October 1988 was found to be sub-standard because of excessive admixture and dull appearance. The joint inspection was not carried out due to the absence of consignor's representative. It was disposed off only in November 1993 resulting in avoidable storage and administrative expenditure. In addition there was a loss of Rs.7.08 lakhs on its disposal.

4.13    The Corporation sustained heavy loss not only in quantity and quality in respect of stocks received from other zones but also in respect of grains moved within the zones. Such sub-standard stocks which are not issued to the PDS are to be auctioned.

A few illustrative cases are given below:

i)    8794 MTs of sub-standard rice, accumulated at several food storage depots in Ludhiana district, was declared unfit (March 1986) for distribution under Public Distribution System. A Committee determined (May 1986) that 1841 MTs of common rice and 4495 MTs of superfine rice out of 8794 MTs was not fit for use. By the time the sub-standard stock was put to sale in December 1986, 6274 MTs of rice valuing Rs.181.80 lakhs could fetch only Rs.98.27 lakhs resulting in a loss of Rs.83.53 lakhs.

(ii)    The Mokameh depot, Bihar had a stock of 39501 MTs in September 1990, out of which 33750 MTs were downgraded between October 1990 and September 1991 because of poor turnover. Out of the downgraded stock, 2599 MTs were issued to PDS and 29173 MTs sold in the open market. The balance quantity of 1978 MTs was reckoned as storage loss. The open sale was made at a lower price since the foodgrain was of poor quality. The loss on account of lower price was Rs.43.76 lakhs and Rs.53.38 lakhs on account of storage loss.

(iii)    By April 1988 the Orissa Region had accumulated 3994 tonnes of paddy over a period of 12 years. Sale by auction of 3717 MTs of paddy resulted in a loss of Rs.49.79 lakhs including loss towards storage shortage of 273 MTs.

(iv)    District Office Purulia procured a quantity of 3771 MTs of paddy in 1984-85. Out of this quantity, 3398 MTs was retained for 6 years without milling or selling the paddy. 3105 MTs was disposed off through tenders at a price lower by Rs.22.67 lakhs than the reserve price. A quantity of 271 MTs worth Rs.3.81 lakhs was declared as storage loss. Due to prolonged retention of paddy for well over six years, FCI had to forego an inflow of funds of Rs.26.48 lakhs. In addition, storage, transportation and administrative costs had been incurred in carrying the stock for six years. While these costs could not be quantified, rent for the godown where the paddy was retained, amounted to Rs.17.54 lakhs. In all, the avoidable loss exceeded Rs.44.02 lakhs.

(v)    A quantity of 3848 MTs received during 1984 to 1989 in various depots of Kochi (Kerala region) was disposed off after a period of five to eight years. Considerable time, ranging between 1 to 2 years, was taken in identifying the stock as substandard/ damaged. Besides this, disposal of such stocks was delayed between 20 to 79 months after identification. FCI incurred an expenditure of Rs.124.12 lakhs by way of carrying cost of stock and Rs.48.39 lakhs was lost due to further deterioration in quality on account of prolonged storage.

4.14    The Ministry of Food & Civil Supplies (Department of Food) delegated (April 1986) the power to dispose off sub-standard rice after observing certain norms to FCI. The Corporation was required to submit a quarterly report to the Ministry giving full details of the lots of sub-standard rice so disposed of. The powers of FCI were enhanced from time to time and in August, 1992 the Ministry delegated full powers to it to dispose off the sub-standard stocks of foodgrains.

During the test check of disposal of sub-standard rice for the period 1990-91 to 1992-93, it was seen that there were delays in obtaining internal approvals for the disposal and there were delays in actual disposal after approvals were given. Such delays resulted in losses to the tune of Rs.3242.39 lakhs on account of increased deterioration due to prolonged storage, incurring of storage charges and interest charges.

4.15    To conceal the storage losses, some of the depots were recording stock at lessweight at the time of receipt, thus showing abnormal transit losses while storage gain was noticed at a later date for the same consignment. Some such instances of stock received at Indore depot in 1992 are detailed below:-

(i)    A consignment of wheat received at Indore (April 1992) recorded 2.21% transit loss. A baby stack built out of the above consignment recorded an abnormal storage gain of 143%.

(ii)    A rake of wheat received from Moga (May 1992) recorded a transit loss of 1.37%. After storage for 3 to 4 months the stacks raised out of the above consignment showed a storage gain of 0.63 to 10.64 quintals.

(iii)    A rake received from Ajitwal (August 1992) recorded a loss of 2.27%. Eight stacks raised from this consignment recorded storage gains of 1.80 to 13.40 quintals.

4.16    Heavy losses also occurred due to storage in temporary and transit sheds. Stocks received at Food Storage Depot (FSD) Sewree were stored in temporary sheds resulting in substantial losses as indicated below:-

Period

Qty. Kept
(MTs)

Storage duration
in No. of days

Loss
(MTs)

Percentage
of loss

Sept.91

2891

20

83

2.87

Oct.91

2540

11 to 17

75

2.95

Jan.92

5740

6 to 28

138

2.40

FCI could have avoided/reduced the losses by transferring the stocks to a regular godown, which had available capacity to handle the above stocks.

4.17    Periodical physical verification of stocks is important in the case of FCI because stocks are moved through the length and breadth of the country, and stored in over 1500 godowns and plinths, and also because 80% of the assets of FCI are in the form of foodgrains. FCI loses heavily on account of thefts, misappropriations and shortages. Despite the overwhelming need, FCI has paid scant regard to this important item of work. Every year the annual financial accounts of FCI include many qualifications regarding the value of stocks held. Such qualifications to accounts are persistent and preponderant.

The Ministry intimated (January 1995) that improvement had already been brought in conducting annual physical verification and ZMs/ SRMs had been directed to conduct 100% weighment of one compartment in 52 centres. Besides, physical verification in March 1994 was conducted by persons other than the stock holders. Similar instructions were being issued for conducting annual physical verification in March 1995.