Planning for FCI Silo Tenders: A Comprehensive Guide
Hello, Businessmen! Welcome to the KIP. In this blog, we provide you with a detailed overview of how to effectively plan for the upcoming FCI (Food Corporation of India) silo tenders.
Introduction to FCI Silo Projects
FCI has been a key player in India’s warehousing sector, known for its long-term, durable storage solutions and advanced technology models. Silo projects, which are designed for bulk storage of grains and other commodities, have gained prominence across the country. Managed by the Ministry of Food, FCI has been inviting tenders for these silo projects since 2016. In 2023, FCI invited tenders for 66 locations through 18 projects across 8 states. Unfortunately, these tenders were not successfully implemented, but there is a strong possibility that they will be reissued soon, possibly with more locations added.
Planning for FCI Silo Tenders
If you are considering investing in the warehousing sector and wish to participate in these tenders, it is essential to plan for the Pre-Qualification (PRI) process. This will ensure that you are well-prepared to apply as soon as the tenders are released.
Understanding the FCI Silo Models
FCI offers two basic models for silo projects: the Hub Model and the Spoke Model.
Hub Model: This model involves locations connected by railway lines, where godowns are established at these railway-connected hubs. These hubs serve as the central points for storage and distribution.
Spoke Model: This model involves locations connected by roads, where godowns are connected by road networks. These locations act as spokes linked to the central hub.
In previous tenders, FCI required applicants to submit tenders for both the hub and the associated spoke locations. Therefore, if you are planning to participate, you need to identify which model suits your land and business strategy.
Land and Network Criteria
The minimum land requirement for the Spoke Model is 4 acres, while for the Hub Model, it can go up to 15 acres. It’s important to keep track of previous tender locations and land norms to align your plans accordingly.
Another crucial factor is the network criteria, which typically require up to 25% of the total project cost. Whether you are an individual applicant or representing a firm, partnership, or corporate structure, it is essential to ensure that your financials meet the network criteria. By March 31, 2024, all financial records should be audited to reflect compliance with these norms.
If you find it challenging to meet the network criteria individually, consider forming a consortium or Special Purpose Vehicle (SPV) with partners. This allows multiple entities to collaborate, pooling their resources to meet the necessary financial requirements.
Financial Feasibility and Project Viability
Participating in the tender requires a thorough understanding of the revenue model, which includes fixed storage rent, variable rent, and handling charges. The fixed storage agreement typically spans over 32 years, making it crucial to bid a competitive yet viable price.
To determine the feasibility of your project, it is important to conduct a financial analysis. This includes estimating construction costs, projecting cash flow, and calculating the project’s Internal Rate of Return (IRR). You also need to consider the cost of borrowing (interest rates) and the proportion of your own funds versus bank loans required.
For those interested in subsidy benefits, especially for warehousing projects in specific states, it is advisable to explore the available subsidy provisions. Aligning financial feasibility with subsidy opportunities can significantly enhance the viability of your project.
Expertise and Consultancy Support
At KIP, we have been offering warehouse business subsidy consultancy services since 2008. Our team has extensive experience in both the technical and financial aspects of silo projects. We have worked with prominent clients like the Adani Group in Panipat, Haryana, NCML Group in Haryana and Punjab, and Unipro Group in Rohtak. Our expertise includes analyzing past tender rates, estimating construction costs, and providing customized financial feasibility reports.
If you need updates, financial feasibility reports, or any other assistance related to FCI silo tenders, feel free to reach out to us. We are here to support your business journey in the warehousing sector.
Conclusion
Thank you for reading this blog. If you found it helpful, please share it with others. Stay tuned for updates on FCI silo tenders and other valuable business information.
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