The Food Corporation of India’s (FCI) Rs 20,000 crore silo programme was supposed to modernise how India stores its food grain stocks for the public distribution system. Instead, it ended up concentrating thousands of crores worth of contracts in the hands of just two companies.
Across two phases of FCI’s “Hub and Spoke” silo scheme, Adani Agri Logistics Ltd and Leap India Food & Logistics Private Ltd together bagged 110 out of 134 silo contracts worth more than Rs 16,500 crore. Around 46.5 lakh metric tonnes (LMT) of grains, out of the total 60, will be stored in silos owned by these two companies.
What makes the concentration striking is that FCI itself had initially proposed an “anti-monopoly” clause to stop a single company from cornering the projects. But in a crucial 2022 meeting, NITI Aayog and the Department of Economic Affairs opposed the restriction. Their argument was to let market forces prevail. The clause was dropped.
Soon after, Adani won every single contract in the second round of Phase 1. By Phase 2, a duopoly had emerged. Adani and Leap dominated India’s largest modern grain storage programme.
India’s competition watchdog, the Competition Commission of India, flags excessive market concentration and monopolistic behaviour across sectors. In the case of the silo project, government departments themselves pushed for the removal of safeguards in ways that favoured large corporations over smaller players. Though both AAL and LIFL were the lowest bidders in the contracts they bagged, such concentration would not have been possible with anti-monopoly safeguards.
In 2022, FCI floated tenders for Phase 1: 80 locations across nine states and one union territory with contracts collectively worth Rs 11,915 crore, making it the single largest tranche of silo contracts in FCI's history.
Out of the total 80 silos, 14 were tendered under Design-Build-Finance-Operate-Transfer (DBFOT) mode where FCI provides the land. The remaining 66 under Design-Build-Finance-Own-Operate (DBFOO) mode, where the private player has to provide the land.
The first set of tenders was floated for DBFOT mode on April 26, 2022. Adani Agri Logistics Ltd won 4 out of 14 contracts with the remaining contracts distributed among other bidders like LIFL, Marathon Realty Pvt Ltd and KCC Infra Pvt Ltd.
Around two weeks after these tenders, a key policy meeting fundamentally altered the structure of the programme. On May 13, 2022, a Public Private Partnership Appraisal Committee (PPPAC) meeting, attended by senior officials from FCI, Department of Economic Affairs (DEA) and NITI Aayog, among other ministries and departments, made a series of fundamental changes to the tender structure.
When the next set of tenders was floated for 66 DBFOO projects on June 21, 2022, Adani Agri Logistics Ltd won every single contract.
Eventually, 70 of these 80 contracts – 87.5 percent of all Phase 1 silos – went to Adani Agri Logistics Ltd. These contracts accounted for Rs 9,713 crore out of the total Rs 11,915 crore awarded. The company won silos across Punjab, Gujarat, Madhya Pradesh, Haryana, Jammu, West Bengal, Uttar Pradesh and Bihar. According to official FCI records, construction has begun at 74 of the 80 silo sites awarded in Phase 1, while at least five are already operational.
The FCI, however, had not intended the programme to unfold this way.
Much before the bulk of the contracts were awarded, there were two decisive meetings.
The first was the Standing Finance Committee (SFC) discussion, held on December 14, 2021, under the chairmanship of the Secretary, Food and Public Distribution. The agenda was to discuss the proposal for development of silos under the Hub and Spoke model as the country faced a storage gap of 240 LMT at the time. FCI proposed building new silos under PPP mode at 249 locations with a total capacity of 108.375 LMT.
In the meeting, the Department of Economic Affairs (DEA) and NITI Aayog suggested bidding out the silo locations in bundles instead of individual projects. They argued that it “will help in unlocking better value and will encourage serious players to participate in the bid having sound financial and technical capabilities”. It was also pointed out that “bundling of projects might lead to economies of scale and will eliminate the bidding inefficiencies that will come up with bidding 249 locations individually.”
DEA and NITI Aayog also recommended, “The size of the bundle should be reasonable…may be around Rs. 800-1,000 crore.” FCI responded that “suitable packaging will be finalised taking into consideration various relevant aspects.” Thereafter, the committee decided that FCI would rework the proposal and incorporate these changes.
However, the final bundle sizes far exceeded the recommended Rs 800-1,000 crore range, especially in the DBFOO round of Phase 1. Some bundles reached nearly four times that size – around Rs 3,900 crore. Others were worth Rs 2,400 crore and Rs 1,900 crore.
Such large bundles often favour companies with deep balance sheets, effectively shutting out smaller players who may still have had the technical capability and operational capacity to run silos.
Around two weeks after the first few tenders were floated, the Public Private Partnership Appraisal Committee (PPPAC) met under the chairmanship of Ajay Seth, Secretary, Economic Affairs, on May 13, 2022.
FCI informed the committee that in its current formulation of tenders, “maximum one project can be awarded to a single bidder”. This meant that even if a company won the lowest bid for multiple projects, it would be allowed to get only one. The remaining projects would go to other bidders, even if their bids were slightly higher. Such caps are usually put to prevent monopolies, distribute work among multiple vendors and reduce dependency on a single company.
FCI argued that there are very few silo operators in India and they also depend on foreign technology. It added, “In order to prevent monopolisation, the provision of restriction of one bundle to one bidder may be kept.” Though it was clarified that this restriction would be temporary – a bidder who wins in Phase 1 can bid again in Phase 2.
But NITI Aayog objected to this ‘anti-monopoly’ clause. It argued that since the country needs 240 LMT of storage and only 24.75 LMT across 66 locations is being developed in this round, “the presumption of concentrations and monopoly of storage capacity does not appear to be well founded”. It further suggested that “in order to get financially sound bids” and “in the interest of competition and letting market forces prevail, no restriction on number of projects that can be bided/awarded to a single entity may be made at this stage.”
NITI Aayog also objected to the use of reverse auctions – a mechanism that compels bidders to continuously lower their prices in competitive rounds until the cheapest offer wins. It argued that reverse auction “may not yield the presumed benefits” for infrastructure projects and could lead to “frivolous or higher initial bids”. This removal meant sealed bids would win without further price competition.
The DEA backed NITI Aayog’s objections. The minutes of the meeting recorded, “All the issues raised by NITI [Aayog] have also been raised by DEA and it is suggested to revise the documents [tender documents] accordingly.”
DEA went further, adding that the “minimum eligibility qualification/shortlisting of bidders should be only based on the financial capacity. This will widen the bidding universe to include financial sector players also, who may not possess the necessary technical experience but have the requisite financial strength for implementing the projects, thus improving the biddability of the projects.”
A third government body at the meeting, the Department of Expenditure (DoE), raised a separate warning that received no follow-up in the final recommendations.
To understand what DoE flagged, it helps to know how the silo contracts work financially. A private operator puts in a portion of its own capital (equity) and borrows the rest from banks (debt). FCI then makes annual payments to the operator over 30 years; payments large enough to cover the operator’s loan repayments and to generate a return on the operator’s own investment.
A feasibility study by Rail India Technical and Economic Service (RITES) had assumed that private players would earn a 15 percent return on their equity, while bank borrowing costs would be around 9 percent, the PPPAC noted. DoE argued that this gap was too wide: the higher the promised return, the higher FCI’s annual payments would be over three decades, ultimately increasing the long-term burden on the government. It recommended reducing the equity return assumption to 11 percent.
The final PPPAC observations do not address the equity return issue at all. Newslaundry could not ascertain whether these were addressed later or separately.
After deliberations, the PPPAC decided to recommend the project to the competent authority for ‘in principle and final approval’. The recommendation for ‘development of steel silos’ at 66 locations on DBFOO basis on PPP mode’ was subject to certain key ‘observations’, three of which materially shaped the bidding structure.
First, that there would be no restriction at this stage on the number of projects that could be awarded to a single bidder. Second, that qualification and shortlisting under the Request for Proposal (RFP) process would be based solely on financial capacity to maximise investor participation. Third, no reverse auction process for these projects.
In Phase 2, FCI floated tenders for 54 locations on September 18, 2024. Of these, six locations, all in Maharashtra, were terminated before execution. Out of the remaining 48 locations, Leap India Food & Logistics Pvt Ltd won 38 – worth Rs 6,173 crore of the Rs 7,149 crore.
Leap India Food & Logistics Pvt Ltd is an agricultural logistics and storage company, incorporated in 2016 and registered at Coimbatore. In recent years, the company has emerged as a major player in the Food Corporation of India’s silo expansion programme. It also attracted international investment as it built its FCI portfolio. In 2018, Neev Fund invested USD 10 million in the company. In 2020, the second round of investments came. The company received USD 23 million from the Danish SDG Investment Fund managed by Denmark’s development finance institution, the Investment Fund for Developing Countries (IFU), alongside additional capital from the Neev Fund, an infrastructure-focused fund backed by the UK government’s then Department for International Development (DFID) and the State Bank of India.
A total of 44 locations from Phase 2 are still in the CP (conditions precedent) fulfillment stage – the mandatory preliminary requirements that a winning bidder must satisfy before the actual contract operations can commence. These conditions include bank guarantees, land acquisition, statutory clearances, among others. Any failure to meet these conditions can lead to contract termination or the forfeiture of deposits.
For instance, Leap India Food & Logistics had already been served show-cause notices for four Punjab locations worth around Rs 666 crore at the time of writing this report. FCI officials told Newslaundry that bidders have often failed to meet CP conditions in the past, forcing the corporation to terminate contracts and reissue tenders.
Though this pattern predates the Hub and Spoke model.
In Bihar, three silo locations were awarded between 2018 and 2022, but the contracts were later terminated. These same locations have now resurfaced in Phase 2 and have again been awarded to Leap India. A similar cycle played out in West Bengal. In a 2016 silo tender covering several states, three locations in West Bengal were awarded to companies, but all three contracts were terminated within 17 months. The locations were re-tendered in 2018, only to face another round of terminations. In effect, the same West Bengal projects were tendered twice – and failed twice.
Together, Adani and Leap India now dominate the FCI’s modern silo programme. Across both phases, Adani remains the single largest player with contracts worth over Rs 9,700 crore while Leap India is positioned to become the second largest if its projects clear the CP fulfillment stage.
Newslaundry has sent questionnaires to the FCI, Department of Food and Public Distribution, Department of Economic Affairs, NITI Aayog, Department of Expenditure, AAL and LIFL. This report will be updated if a response is received.
This report was originally published by Newslaundry and can be accessed here.
