- Food corporation of India (FCI),
- State Agricultural Marketing Federation (Market yards),
- State co-operative societies,
- Whole sale dealers i.e. Rice millers,
- Retail merchants.
Classification of Paddy varieties
as per Central Government norms
The central Government Of India has earlier classified
the paddy varieties into 3 grades, namely
- Common variety which gives raise short bold and long bold rice
- Fine variety which gives raise to medium slender rice
- Super fine variety which gives raise to long slender and short slender
Common variety - Rice grain measures less than 6 mm length.
Ratio of length and thickness is less than 2.5.
Grain Size Shape & Appearance
- Fine variety - Rice grain measures less than 6 mm length. Ratio of
length and thickness is in between 2.5 to 3.0 or Rice grain length 4.5mm
with ratio of length and thickness as 2.0 to 2.5.
- Super fine variety - Length of rice grain is less than 6 mm and ratio
of length and thickness is more than 3.0.
- But off-late the government has clubbed fine variety and super fine
variety into one grade, namely fine variety. As such now only two grades
exist in the marketing,
- In Haryana high yielding fine varieties and Basmati (scented) are
grown in 30-40% area. They have been classified on the basis of mainly
length of rice.
|| Extra long
|| > 7.5 mm
|| over 3.0
|| 6.61-7.5 mm
|| 2.1 3.0
|| 5.51-6.6 mm
|| 1.1 2.0
|| 5.50 mm or less
|| 1.0 or less
The grading of rice depends on percentage
of full grain with no of brokens.
- Premium grade - 95 % full grain,
- 1st grade - 85 % full grain,
- 2nd grade - 75 % full grain,
- 3rd grade - 65 % full grain.
The marketing prices of different grades are as follows
| fine A grade
|| Rs. 520/quintal
|| Rs. 570 to 575/quintal
| Common variety
|| Rs. 490/quintal
|| Rs. 540/quintal.
- Bulk of paddy is purchased by millers. FCI is purchasing rice from
millers after milling.
- Till the beginning of the century, hand-pounding was the main technique
adopted for getting edible rice form paddy.
- A very small portion not exceeding 10 per cent can be said to be hand-
- Huller mills started replacing hand-pounding and presently paddy is
milled in huller, disc-sheller and rubber- roll- sheller mills.
- From nutritional point of view, boiled rice and less polished rice
are relatively better.
- Boiled rice is in demand only in West Bengal, Orissa, Bihar, Tamil
Nadu and Kerala.
- The capacity of production of boiled rice, therefore, is limited.
- Parboiling is a process of steeping paddy in cold water and then into
hot water (or in steam at low pressure).
- Which is probably originated in India some 2000 years ago and is now
practiced in many countries. Nearly 57% of the rice produced in India
Traditional method of parboiling
- Paddy is steeped in large brick tanks for a period of one to three
days, the longer period being necessary for the bolder types of paddy,
which are also subjected to higher initial temperature of water.
- The initial temperature of water may therefore very from 60º to 82ºC.
The period of steeping also varies with the season.
- Instead of steeping for one to three days, paddy may be boiled for
twenty minutes. It is then transferred to steel containers where it
is subjected to low pressure steam (15 lb(or) 6.8 Kg) for ten to twenty
- The bolder types of grain demanding the longer period. The grain will
become completely gelatinized after parboiling.
- In the more modern plants paddy is steeped and boiled in the same
steel or concrete container and by using higher average steeping water
temperatures, the whole process is reduced to a period varying from
eight to sixteen hours.
- The paddy, then removed to drying floors, either sun-dried or placed
on steam heated floors.
- The keeping qualities of parboiled rice are considerably superior
to those of raw milled rice, even if they are not so good as polished
rice, because the process of parboiling removes the greater part of
the oil in the grain.
- The steam process is likely to sterilize the grain and thus destroy
enzymes and moulds that might subsequently damage to grains.
- Parboiled rice when cooked for eating has better keeping qualities
than ordinary white rice and does not readily turn sour.
Advantages of parboiling
- Parboiling makes it possible to produce from a given amount of paddy
more rice with less breakage in milling.
- To use of lower grade of paddy.
- To obtain a rice with superior keeping qualities.
- To retain more of the nutrients of the grain during milling, washing
- Conserve the vitamins and minerals in the grain.
Marketing Channels For Paddy Distribution
Channel I: Producer®
Middle Men ® Rice Miller® Whole Saler® Retailer ®
Channel II: Producer®
Commission Agent® Rice Miller® Govt. Procurement ®
Fair Price shop® Consumer. To fix price of middle man, miller, retailer,
etc. and consumer price the factors responsible in different channels
are given below:
Price Spread Of Paddy Through Channel I. (one quintal of
rice = 1.5 q of paddy)
| Net price received by the
| The purchasing price for
| Costs incurred by Middle
| Weighing and Loading
| Transport charges
| Cost of Gunny bag
| Middle men total cost
| Middle men Margin
| Millers purchase price
| Cost incurred by rice millers
| Weighing & Unloading
| Processing charge
| Rice miller total cost
| Income from by products
| Millers total margin
| Purchasing price for wholesaler
| Costs incurred by wholesaler
| Transport charges
| Wholesaler margin
| Retailers purchase price
| Cost incurred by retailers
| Transport charges
| Retailers Margin
| Consumer price
| Price spread
Price Spread Of Paddy Through Channel II
| Net price received by producer
| Costs incurred by producer
| Transport & handling
| Market fee (1%)
| Commission Charges(2%)
| Cost of gunny bags
| Cutting of bags and taking
sample for verification
| Total cost incurred by producer
| Price paid by commission
| Cost incurred by commission
| Total cost incurred by commission
| Commission agent margin
| Commission agent selling
| Costs incurred by miller
| Weighing and Unloading
| Processing charge
| Rice miller total cost
| Income from by product(deduct
from millers cost including processing & others)
| Millers margin
| Purchasing price of Govt
| Price in fair price shop
| Subsidy by Govt.
- Warehouses are scientific storage structures especially constructed
for the protection of the quantity and quality of stored products.
- Warehousing may be defined as the assumption of responsibility for
the storage of goods.
- It may be called the protector of national wealth.
- The produce stored in warehouses is preserved and protected against
rodents, insects and pests, and against the ill effect of moisture and
- The warehousing scheme in India is an integrated scheme of scientific
storage, rural credit, price stabilization and market intelligence and
is intended to supplement the efforts of co-operative institutions.
The important functions of warehouses are
- Scientific Storage: Here, a large bulk of agricultural commodities
may be stored. The product is protected against quantitative and qualitative
losses by the use of such methods of preservation as are necessary.
- Financing: Warehouses meet the financial needs of the person who stores
the product. Nationalized banks advance credit on the security of the
warehouse receipt issued for the stored products to the extent of 75
to 80 percent of their value.
- Price Stabilization: Warehouses help in price stabilization of agricultural
commodities by checking the tendency to make post-harvest sales among
the farmers. Farmers or traders can store their products during the
post harvest season, when prices are low because of the glut in the
market. Warehouse helps in staggering the supplies throughout the year.
They thus help in the stabilization of agricultural prices.
- Market Intelligence: Warehouses also offer the facility of market
information to persons who hold their produce in them. They inform them
about the prices prevailing in the period, and advise them on when to
market their products.
- This facility helps in preventing distress sales for immediate money
needs or because of lack of proper storage facilities. It gives the
producer holding power; he can wait for the emergence of favourable
market conditions and get the best value for his product.
Types of Warehouses
Ware houses may be classified on two basis
1) On the Basis of Ownership
- These are owned by individuals, large business houses or wholesalers
for the storage of their own stocks.
- They also store the stocks of the individual farmers, group of farmers
and charge for the storage.
- These are the warehouses which are owned by the government and are
meant for the storage of goods of any member of the public against a
prescribed storage charge.
- The method of operation and the charges for storage are regulated
by the government.
- These warehouses are specially constructed at a seaport or an airport
and accept imported goods for storage till the payment of customs by
the importer of goods.
- These warehouses are licensed by the government for this purpose.
- The owner of the warehouse gives an undertaking to the government
that customs duty will be collected from the person before he is allowed
to remove the goods from the warehouse.
- In other words, the goods stored in this warehouse are bonded goods.
- They may be owned by the dock authorities or privately-owned; but
they have to work under the close supervision and control of the customs
The following services are rendered by bonded warehouses
- The importer of goods is saved from the botheration of paying customs
duty all at one time because he can take delivery of the goods in parts.
- The operation necessary for the maintenance of the quality of goods
spraying and dusting, are done regularly.
- Entrepot trade(re-export of imported goods) becomes possible.
- The importer may take delivery of the goods without paying the customs
duty if they are to be re-exported.
- He is thus saved from the botheration of first making the payment
of customs duties on imported goods and then getting a refund on re-exported
2) On the basis of Type of Commodities
- These are ordinary warehouses used for storage of most of foodgrains,
- In construction of such warehouses no commodity-specific requirements
are kept in view.
Special Commodity Warehouses
- These are warehouses which are specially constructed for the storage
of specific commodities like cotton, tobacco, wool and petroleum products.
- They are constructed on the basis of the specific requirements of
- These are warehouses in which temperature is maintained as per requirements
and are meant for such perishable commodities as vegetables, fruits,
fish, eggs and meat.
- The temperature in these warehouses is maintained below 3° C
to 5° C f or even less, so that the product may not get spoiled
by high atmospheric temperature.
Costs And Return Of A Warehousing Enterprise
- The costs incurred in storage and warehousing can be divided into
- These costs are permanent nature and remain the same irrespective
of the quantity stored in the warehouse.
The main components are
- Insurance premium paid to the insurance company;
- Taxes, license fees etc;
- Repair and maintenance cost of the warehouse;
- Interest on the investment in construction of the warehouse;
- Salary of the permanent staff;
- Cost of records and book-keeping;
- Fixed part of the electricity charges (meter rent and minimum fixed
- These costs are of varying nature i.e., they vary with the quantity
stored in the ware house.
- The main components are: Cost of protective material used viz. Insecticides,
pesticides, rodenticides, gunny bags, polythene cover, wooden slabs
- Cost of electric power;
- Wages of temporary labour.
- A young entrepreneur has constructed a warehouse with a storage capacity
of 3000 quintals at a cost of Rs. 5.60 lakhs.
- The owner has to incur following expenditure on the operation of the
- Interest on capital @ 15% per annum;
- Repair and maintenance cost Rs.4000 per annum;
- Cost of records and book-keeping Rs 2000 Per annum;
- Taxes and insurance premium Rs.5000 per annum;
- Wages of the manager and permanent labour Rs. 60,000 per annum;
- Electricity bill Rs.24,000 per annum;
- Cost of protective material Rs.8,000 per annum;
- Wages of temporary labour 20,000 per annum.
- Assuming 50 years as the life of the warehouse and 90 percent capacity
utilization, the cost structure of the warehouse emerges as follows:
| Fixed Cost
| Depreciation of the building
|| 2 percent of
|| Rs. 5.60 lakhs
| Interest on the capital
|| 15 per cent of
|| Rs. 5.60 lakhs
| Repairs and maintenance
| Cost of account books &
| Taxes and insurance premium
| Wags of manager and permanent
|| Total fixed costs
| Variable costs
| Electricity bill
| Cost of protective material
| Wages of temporary labour
|| Total variable costs
- Assuming a capacity utilization of 90 percent, the cost of warehousing
for a month works out to Rs.6.74 per quintal.
- This cost includes the return on capital investment.
- In case the entrepreneur has borrowed the capital, the interest that
has been charged on the capital investment has to be repaid to the lender.
- He will able to repay six-monthly installment of Rs. 28,000 and retain
a sum of about Rs. 6,000 a month as his profit, only if he is able to
charge the users a rate of Rs. 10.70 per quintal per month.
Ware housing in India
- In 1928, the Royal Commission on agriculture under stood the need
for a warehousing system in India.
- The Central Banking Enquiry Committee, 1931, too, drew attention to
- The reserve Bank of India emphasized the need for warehouses as early
as in 1944, and proposed that every State Government should enact legislation
to regulate the functioning of warehouses.
- The All-India Rural Credit Survey Committee of the Reserve Bank of
India(was set up in 1951 and submitted its report in 1954) also made
comprehensive recommendations for the development of warehousing as
an integrated scheme of rural credit and marketing.
- As a result of the recommendations of the Committee, the government
of India enacted the agricultural Produce (Development and Warehousing)
Corporations Act, 1956.
The Act provided for
- The establishment of a National Co-operative Development and Warehousing
board (which was set up on 1st September 1956);
- The establishment of the Central Warehousing Corporation (which was
established at Delhi on 2nd March, 1957); and
- The establishment of State Warehousing corporations in all the States
in the country (which were established in various states between July
1957 and August 1958).
- In 1962, the Government of India decided to break up the act of 1956
into two separate Acts-the National Co-operative Development Corporation
Act, 1962, and the warehousing Corporations Act, 1962.
- The warehousing Corporation act came into operation on 18th
- The Act defines the specific functions and the area of operations
of Central and state Warehousing Corporations.
- It enlarged the list of the number of commodities meant for storage.
National Co-operative Development and Warehousing
This was set up on 1st September 1956 to perform
the following functions
- To advance loans and grants to State Governments for financing Co-operative
societies engaged in the marketing, processing or storage of agricultural
produce, including contributions to the share capital of these institutions;
- To provide funds to warehousing corporations and the State governments
for financing co-operative societies for the purchase of agricultural
produce on behalf of the Central Government
- To subscribe to the share capital of the Central warehousing Corporation
and advance loans to State Warehousing Corporations and central Warehousing
- To plan and promote programmes through co-operative societies for
the supply of inputs for the development of agriculture, and
- To administer the National warehousing development Fund.
- In March 1963, the Board was converted into the National Co-operative
Development Corporation (NCDC), and its functions were limited to co-operative
Central Warehousing Corporation (CWC)
- This Corporation was established as a statutory body in New Delhi
on 2nd March, 1957.
- Under the new Act, the Central Warehousing Corporation was formally
re-established on March 18, 1963.
The functions of the Central Ware housing Corporation
- To acquire and build godowns and warehouses at suitable places in
- To run warehouses for the storage of agricultural produce, seeds,
fertilizers and notified commodities for individuals, co-operatives
and other institutions;
- To act as an agent of the government for the purchase, sale, storage
and distribution of the above commodities;
- To arrange facilities for the transport of above commodities;
- To subscribe to the share capital of State Warehousing corporations;
- To carry out such other functions as may be prescribed under the Act.
While foodgrains, sugar and fertilizers accupy 78 percent of the total
utilized storage capacity, in the remaining 22 percent are stored cement,
chemicals and other commodities.
- Warehouses of the corporation are fairly full all through the year.
- The Corporation has introduced a scheme, called the Farmers Extension
Service at selected centres to educate the farmers in the benefits of
a scientific storage and use of public warehouses.
- The Central Warehousing corporation also provides a package of services
, such as handling and transport; safety and security of goods; insurance,
standardization, documentation; and other connected service facilities.
State Warehousing Corporations(SWCs)
- State warehousing corporations were also set up in different States
of the India Union.
- The first warehouse was set up in Bihar in 1956.
- At the end of March 1994, State Warehousing Corporations were operating
1364 warehouses with a total capacity of over 98 lakh tonnes.
- The area of operation of the State Warehousing Corporations are centres
of district importance.
- The total share capital of the State Warehousing Corporations is contributed
equally by the concerned State Governments and the Central Warehousing
- The SWCs are under the dual control of the State Government and the
Central Warehousing Corporation.
Working of Warehouses
- The warehouses (CWC and SWCs) work under the respective Warehousing
Acts passed by the Central or State Governments.
- They are licensed under the provisions of the Act.
- Eligibility: Any person may store notified commodities in a warehouse
on agreeing to pay the specified charges. The person is required to
bring his produce to the warehouse for storage. The commodity is inspected,
and the quality of the product is determined.
- Warehouse Receipt (Warrant): This is receipt/warrant issued by the
warehouse manager/owner to the person storing his produce with them.
This receipt mentions the name and location of the warehouse, the date
of issue, a description of the commodities, including the grade, weight
and approximate value of the produce based on the present price.
- The Warehouse warranty is a negotiable instrument and can be transferred
by a simple endorsement and delivery. A delivery of part of the goods
may be taken through this warrant by the depositor. Sometimes, the warrant
may be non negotiable.
- Use of Chemicals: The produce accepted at the warehouse is preserved
scientifically and protected against rodents, insects and pests and
other infestations. Periodical dusting and fumigation are done at the
cost of the warehouse in order to preserve the goods.
- Financing: The Warehouse receipt serves as a collateral security for
the purpose of getting credit. Commercial banks advance up to 75 percent
of the value of the produce stored in the warehouse.
- Delivery of produce: The warehouse receipt has to be surrendered to
the warehouse owner before the withdrawal of the goods. The holder may
take delivery of a part of the total produce stored after paying the
Licence For Running Warehouse
The main provisions of the Act governing the grant of
a licence to run warehouses are
- Any person, including a company, association or corporate body may
apply to the State Government for the grant of a licence to carry on
the business of warehousing.
- The government grants the licence after examining the warehouse building
and the financial soundness of the party, and after the realization
of the prescribed fees.
- The licence has to be renewed periodically on payment of prescribed
- The warehouse owner is authorized to receive only notified commodities
for storage in his warehouse and issue receipts in a prescribed form.
- It is the responsibility of the warehouse owner to keep the premises
clean, keep different lots of goods separately in the warehouse, and
carry on such operations as are necessary to protect the goods against
losses from damage and pilferage.
Number And Capacity Of Warehouse
- The Government, the food Corporation of India, Co-operative Marketing
Societies and Central and State Warehousing Corporations have taken
important measures for the cretion of warehousing facilities in the
- As a result, a large number of warehouses/godowns have been built
throughout the country in all important rural and urban centres, metropolitan
cities, ports and railway stations.
in Lakh Tonnes
Utilization Of Warehousing Capacity
- The utilization of warehousing capacity of the Central Warehousing
Croporation was only 42 percent in 1959-60, which increased over time
to 96 percent in 1970-71.
- The utilization of the capacity of State Warehousing corporations
increased from 64 percent in 1960-61 to 75 percent in 1968-69.
- At present, about 85 per cent of their storage capacity is being utilized.
- But the available storage capacity is mostly utilized by traders and
The main reasons for the very low utilization of warehouses
by farmers are
- Lack of knowledge about the facility of warehousing available for
- Locational disadvantages for ware houses to most of the cultivators
located in villages;
- Complicated and time-consuming procedure of depositing and withdrawing
the produce from the warehouses;
- Non-existence of nationalized banks in villages and the problem of
arranging finance at the time of taking delivery of the receipt from
the bank; and
- Small quantity of surplus produce available with most farmers, and
the pressing need for finance.
- These apart, there are some fundamental factors responsible for lower
use of warehouses and consequent slow progress in rural areas.
Causes for slow progress of warehouses in India
- Indian farmers are small landowners. Obviously, the marketed surplus
them is small. Often, it is not worth while for them to store the produce
in a warehouse;
- Indian agriculture is largely dependent on the monsoon and occasional
failures of crops in
one or another part of the country are common resulting in lack of regular
business for the warehousing;
- Agricultural products are more perishable than industrial products;
- Agricultural commodities are heterogeneous. Their grading is, therefore,
placing them in a warehouse. This facility is not available in most of
- The warehouses are located in urban centres, near railway stations
and big cities. The
transport facility from the villages to these centres is not easily available.
- The cost of warehousing per unit of the produce is high;
- Warehouse receipts are papers having no intrinsic value, unless the
lenders are sure that these receipts are backed by tangible assets.
Often, the lenders are not interested in lending against this collateral
- The projected availability of food grains and the currently available
storage capacity in India show that there is big gap in storage capacity.
- This gap has to be bridged as early as possible if advantage is to
be taken of the benefits of increased foodgrains production.
- The Union government, therefore, constituted a Working Group on Warehousing
to go into this question.
- The working Group, in its report submitted to the Ministry of Agriculture
and Irrigation, made the following recommendations:
- A network of rural storage centres should be built on a priority basis
in order to prevent distress sales, wastage and loss arising out of
inadequate and defective storage facilities; These storage centres may
be constructed and managed by panchayats, co-operatives and other suitable
agencies selected by the State Government.
- These centres may have a storage capacity of 100 to 250 tones, mainly
for food grains and other agricultural produce.
- The cost of construction of these structures, may be met by a 50 per
cent subsidy and 50 percent bank loans.
- Out of the subsidy part, 35 percent may be borne by the Central Government
and 15 percent by the State Government.
- Each rural storage centre should have a manager, preferably from the
area served by the centre.
- The manager should be trained in the basic essentials of warehousing
by attaching him to a warehouse of the CWC or SWC;
- Technical guidance, supervision and assistance in the design, construction
management of the centres should be provided by the CWC/SWC free of charge
or at nominal rates.
- Farmers should be provided with receipts for the commodities stored
by them. Each
receipt should be a check instrument to enable them to obtain credit from
- The banks should provide credit to the extent of 90 percent of the
value of the stocks
stored by the farmers; and the credit should be provided at concessional
rates of interst.
- The scheme of rural storage centres should be linked with the procurement
food grains and also with the public distribution system; and
- The programme should be co-ordinated by a state level co-ordination
committee, of which representatives of State governments, the Department
of agriculture, rural development, co-operation and panchayats, the
SCS, FCI and nationalized banks, should be the serving members.
- The Government of India launched a scheme for the establishment of
National Grid of Rural Godowns (NGRG) in July, 1979.
- The scheme aims at the creation of a network of rural godowns in the
States and Union Territories, primarily to take care of the storage
requirements of the small and marginal farmers.
- The scheme is intended to achieve the following specific objectives:
- Prevention of distress sale of food grains and other agricultural
commodities immediately after harvest;
- Reduction in quantity and quality looses arising at present by storage
in sub-standard places;
- Reduction in pressure on transport system in the post-harvest period;
- Creation of employment opportunities in rural areas;
- Helping the farmers in getting loans against the stored products;
- Helping in easy procurement of foodgrains by Food Corporation of India.
- The cost of construction of rural godowns is subsidises to the extent
of 50 percent to be shared equally by Central and State Governments.
- The remaining 50 percent capital is arranged by the implementing agency
such as co-operative marketing society in the form of a loan from the
- The godowns are constructed according to the specifications and designs
approved by the State Warehousing Corporation.
- The size of godowns vary from a capacity of 200 tonnes to 1000 tonnes
depending upon the produce expected for storage in the village.
- The godowns are constructed and managed by co-operative marketing
societies, market committees and State Warehousing Corporations.
- The State warehousing corporations provide technical guidance and
supervision to the implementing agencies in the maintenance and management
of rural godowns.
- The receipts issued by the managers of rural godowns on the basis
of stocks is a negotiable instrument.
- On the basis of the receipt farmers can get loan up to 80 percent
of the value of the produce stored from the commercial bank.