India expects to double the capacity of silos under public-private partnership (PPP) by next

year to 15 lakh tonnes as the government seeks to raise the nationwide holding count six-
fold. To date, bids for constructing silos by the Food Corporation of India (FCI), Central
Warehousing Corporation and state agencies have been cleared for 45 lakh tonne capacity,”
said an official from FCI.
.State-run Food Corporation of India (FCI) has signed pacts with two firms for construction
of four silos at an estimated cost of Rs 165 crore to store wheat.

1. Sudiksha Warehousing will construct one silo of about 25,000 tonnes capacity near
Bangalore for an estimated cost of Rs 30 crore, a source said.
2. The other three silos of 50,000 tonnes each, would be constructed by Karthikeya
Spinning & Weaving Mills in Delhi, Sanhewal in Punjab and near Guwahati
Sr. Capacity Estimated Cost Per ton Constructor Name
No. (Me. Ton) Cost (Cr.) (Inr per Ton)
1 25000 30 12000 Sudiksha Warehousing,
New Delhi
2 50000 45 9000 Karthikeya Spinning &
Weaving Mills, Coimbatore
3 50000 30 6000 Adani Agri Logistics Ltd
55-60 11000-12000 (Without & With Rail Line)
4 50000 36 7200 LT Foods (Punjab)
50000 30 6000 M.P. Warehousing & Logistics
Corporation (MPWLC)
5 NCML
6 Total Shipping and Logistics
Corporation
7 Ahmednagar in Punjab, Vernama in The Container Corporation
Gujarat and Khathuwas in Rajasthan of India Ltd (Concor)
8
For the warehouse :
Sr. Construction cost per Construction cost per
No. sq.ft. for warehouse Ton
For the warehouse
1. 600 3000

There are two types of silos: one is silos with rail connectivity and the second is standalone
silos without rail connectivity.
Without rail connectivity, a typical stand-alone silo of 50,000-tonne capacity costs

about ₹6,000 a tonne or about ₹30 crore to build from scratch, while a silo with rail
connectivity, including land, comes close to ₹55-60 crore per unit of 50,000 tonnes.

If land is taken into account, silos are cheaper than building conventional warehouses.

1. Adani Agri Logistics Ltd was one of the earliest to adopt silo storage. Currently, it is

the only silo storage operator in the country, with a capacity of 8.75 lakh tonnes, and

another 4 lakh tonne silos being built. The rm has a presence in Punjab, Haryana,

Tamil Nadu, Karnataka, Maharashtra, West Bengal, Uttar Pradesh, Bihar and Gujarat,

handling some 1 million tonnes of foodgrain for the Central and State governments

with the entire quantity stored in silos. The company aims to achieve silo storage

capacity of 2 million tonnes by 2022. Apart from Adani, LT Foods, National

Collateral Management Ltd, Shree Kartikeyan Industries and Total Shipping and
Logistics Corporation are building 21.5 lakh tonnes of silo capacity .

2. The Container Corporation of India Ltd (Concor) will build such grain storage facilities

at Ahmednagar in Punjab, Vernama in Gujarat and Khathuwas in Rajasthan, where it

owns land and lease it to the Food Corporation of India for 30 years, besides running
Concor will
the silos for the government-owned food procurement agency.

invest about Rs150 crore to build and run the silos, with
capacities ranging from 50,000 tonnes to 200,000 tonnes. Each of these silos will
cost about Rs 48 crore to build from scratch, including the land costs.

3. LT Foods Ltd entered into public-private partnership (PPP) with PUNGRAIN (the

nodal agency on behalf of the Punjab government) for a 30-year lease agreement to

store the grain at the rate of Rs 1400 per tonne per annum for the grain procured by

the government agencies. The silo has been set up in an area of eight acre, whereas

under the conventional storage to store 50,000 tonne of wheat an area of 20 acre is

utilised. The company with an investment of Rs 36 crore has developed 50,000 tonne
capacity silos in Amritsar for bulk storage of wheat. Agri-business company LT
 Foods that exports packaged rice under the flagship brand Daawat . "Under the PPP

model with PUNGRAIN we have built 'Silos' which are now ready in Mulechak, near

Amritsar to receive wheat from this year's harvest," said V K Arora, CMD, LT Foods.

LT Foods has won the tender to build-own-operate (BOO) Silos for a period of 30

years. LT foods which is one of the major projects of India has opened in India by

MYSILO on 20 march 2015. The facility has four 3520 Model 32 meters in diameter,

huge silos containing plant with a capacity of 63 408 m3.

M.P. Warehousing & Logistics Corporation (MPWLC) has decided to undertake the development of
steel silos for storage of wheat at ten (10) locations in Madhya Pradesh through Public-Private
Partnership on Design, Build, Finance, Operate and Transfer (the "DBFOT") basis. These ten locations
include Sehore, Dewas, Vidisha, Bhopal, Indore, Ujjain, Satna, Harda, Hoshangabad and Raisen. In
the process, Global Engineering, Development and Management Consultants, Mott MacDonald, has
been appointed by MPWLC for preparation of feasibility report for setting up of steel silos for
storage of wheat at all ten locations.
The site for the proposed silo facility is already in possession of the State Government and is located
in the Murli village having an area of about 7 acres . The site is about 3 kms from the nearest rail
head and is connected by Pradhan Mantri Gram Sadak Yojna (PMGSY) road. The procurement
centres are within the range of 20 kms of the site and have a total procurement capacity of about
60,000 MT of wheat. The project cost is estimated to be INR 3,063.52 lakhs for development of
50,000 MT capacity of Steel Grain Silo consisting 4 (four) bins of 12,500 MT of capacity each. The
land of about 7 acres would be allotted by the State Government to the private developer. It is learnt
that a 50,000 MT warehouse would require an area of approximately 18-20 acres.

Incentives to the developers :

The State Government will provide up to a maximum of 20% Viability Gap Funding (VGF)
support, if required, in addition to 20% VGF by Government of India under the VGF Policy.
However, such projects will not be eligible for Capital Investment Subsidy and the Interest
Subsidy.
Such projects shall be awarded through a transparent bidding process and such projects
shall be eligible for business guarantee for 10 years.

Project Cost Estimates

Sr. Percentage of
Description INR Cr.
No. Total Value
1 Land (0) & Site Development (7 Acre) ₹ 0.01 0.02%
2 Buildings and Civil Works ₹ 14.46 47.19%
3 Plant and Machinery ₹ 9.67 31.56%
Electrical Automation and Other
4 Utilities ₹ 2.88 9.38%
 5 Preliminary & Pre-operative expenses ₹ 2.19 7.14%
6 Contingency ₹ 1.35 4.41%
7 Total Block Cost ₹ 30.55 99.71%
8 Margin Money ₹ 0.09 0.29%
9 Total Capital Cost (TPC) ₹ 30.64 100.00%

The proposed capital structure includes 30% Equity & 70% Debt of the total project cost. As
stated in State Warehousing & Logistics Policy 2012 - the project is eligible for viability gap
funding but the same has not been considered in the base case.
The proposed break up of sourcing of funds under base case for development of the silo
project is tabulated as:

Proposed source of funds – Base Case

Amount (Rs.
Sr.No. Description Proportion (% of TPC)
Lakhs)
Total Project Cost
1 (TPC) ₹ 30.64 100.00%
2 Viability Gap Funding ₹ 0.00 0.00%
3 Equity ₹ 9.19 30.00%
4 Debt – IIFCL Funding ₹ 6.13 20.00%
5 Debt – Bank Funding ₹ 15.32 50.00%

IRR: Internal Rate of Return: The IRR is the interest rate, also called the discount
rate, that is required to bring the net present value (NPV) to zero. That is, the
interest rate that would result in the present value of the capital investment, or cash
outflow, being equal to the value of the total returns over time, or cash inflow.

RR or Internal Rate of Return is a way of measuring profitability of your potential

investments. It can be taken as an expected rate of growth for a particular investment.
However, the actual growth and return might differ from the value calculated.

Still, a project with substantially higher IRR as compared to other options has the potential
to provide stronger growth in future.

Let’s take example of an energy company, who has to decide whether to open a new power
plant or renovate an old one. Since both the options are adding value to the company we
will use IRR to determine which option is more logical and profitable.

VGF: Viability Gap Fund: Viability literally means ability to survive successfully. VGF is an
economic instrument (or scheme) of Government of India ,launched in 2004 with the motive
of supporting projects which come under public-private partnerships(PPP) model.

Basically, it is a grant to support projects that are economically justified but are not
financially viable.
Latest examples of these are UDAN Regional connectivity scheme and Metro rail projects.
Under this scheme , the central government offers a VGF upto 20% for a particular project.

VGF is generally provided to those projects which have a long gestation period (time
difference between your investment and it earning profit for you) and when the user
charges cannot be increased to commercial levels.

All in all, it is government’s way of promoting PPP model and distributing its money for
building infrastructure more efficiently.

DSCR: Debt Service Coverage Ratio represents the amount of cash flow you have left
over after expenses divided by your debt payments on the property. This is
calculated on an annual basis. Simply put, the DSCR is the ratio between the income
of your property (Net Operating Income) and the debt service (Principle and Interest)
of your loan. The DSCR is a great way for lenders to analyze the risk level of
approving a loan for your commercial or multifamily property.

Suppose you want to buy an apartment building and need a loan of $700,000. The
first thing you are going to want to do is calculate your DSCR. Let’s assume the
annual NOI totals $160,000, and your required debt service is $125,000. To calculate
your DSCR, you take your NOI (160,000) and divide it by your debt service (125,000).
This will give you 1.28 – your debt service coverage ratio. The calculation is shown
below:

Straight line method (SLM) and Written down value (WDV):

In accounting, there are two methods of calculating depreciation and then, its
comparison with amortization.

How to calculate Rate of depreciation?

SLM is calculated by (Cost of asset - scrap value)/ Life of asset.
WDV is calculated by 1- Life of asset√scrap value/original cost x 100.

Note: Whenever you calculate rate of depreciation using WDV, the scrap value
shouldn't be zero. Because if it's zero, then rate of depreciation would come to zero.
For standard calculation assume scrap value as 5% of cost of asset. It has also been
prescribed by companies act, 2013.

Which methodology i.e., SLM or WDV?

Now, whether you should follow SLM or WDV depends upon your nature of fixed
assets. If you have plant and machinery or any other asset for which you have to
incur repairing cost over years, follow WDV otherwise SLM. Next question, would
come to your mind is why so?

The concept being matching principle.

What does it say? The asset should be equally being written off over the years.
But how in WDV, asset is written off equally? Let me explain you that with an
example.
Eg: Take a machinery. Normally machinery involves huge expense on repair at the the
end of its life and minimal at the beginning. So, we should charge higher
depreciation at the beginning and less amount at the year end to write off equally
over the years.

Less Repairs + Higher Depreciation = High Repairs + Less Depreciation.

Whereas, incase of SLM the company the asset has be written off over the years. The
reason being there are no major expenditure being incurred on it for repairs or any
other thing. So, again applying the same concept i.e., matching principle. Eg:
Computers.

I hope, the above example clears which methodology you should apply for your
assets i.e., SLM or WDV.

Now, coming to the second part i.e., Difference b/w depreciation or amortization.

Let me take an example i.e., bought a computer of Rs. 20,000. Assume the life of the
same as 5 years. Salvage value - Nil.
So, the amount of depreciation would be Rs. 4000 per year.
By the end of year 1, the value of the asset in the books of the asset would be Rs.
16,000. Now, that doesn't represent the fair value of the asset. What if the computer
has been permanently damaged, the fair value then would be Nil.
Here, comes the role of amortization. It says value the asset as per fair value. If the
asset is overvalue, reduce it (amortize it) today by the amount of overvaluation.

Process of amortization

Value in the books less Higher of Net selling price(NSP) and value in use.
If the value in books is less than that of NSP or Value in use. No amortization
because amortization means reducing the value of the asset and not increasing it.

Most important point - When you calculate NSP or Value in use (cash flows it
generates) you should should its value as a unit and not particular asset.
What do you mean by unit? Group of assets together generating cash.
Like, take an example - A building (Unit). It has fans, tables, chairs, AC(Group of
assets). When you rent a building. They ask you the cost of rent and not the cost of
table fan, etc. So, the building as a whole is generating cash and not table, fan
individually.
Lets say the building would generate Rs. 100,000 each year assuming IRR to be 10%.
So, the value in use would be Rs. 10,00,000 (100,000/10%). Net selling price in the
market would be Rs. 900,000 of the building and say, value in our books is Rs.
12,00,000.
Then, asset should be amortized by Rs. 200,000

12,00,000 less higher of 900,000 and 10,00,000. = Rs. 200,000.

So, basically depreciation is a charge on the asset and amortization is reducing the
value to its fair value.

Weighted average cost of capital (WACC) : WACC generally means the weighted average
cost of capital. It is used to denote the cost of capital raised by the firm. It has two parts:

1. Equity
2. Debt
a. Cost of equity, as well as debt, is proportionately divided according to their
weights.
 b. The main cost to be calculated here is the cost of equity(Ke). we calculate it using
the CAPM model.
i. Ke= risk free rate+ beta*(expected market return - risk free rate)
ii. You can take 10-year govt. bonds yield/rate as risk-free rate and market return
can be return given by any of the indices for the calculation period.
iii. Beta is your measure of risk you can calculate it or you can take industry beta from
sources like Bloomberg, Yahoo Finance etc.
c. For the cost of debt(Kd), you can easily calculate it using the company’s book. The
cost that company paid for raising debt.
3. Finally, your WACC is:
a. WACC = Weight of Equity*Ke + Weight of debt*Kd
b. Weights of debt and equity can be easily calculated from the company’s books.

How to build silo—good information on quora---below link

https://www.quora.com/How-can-I-build-a-silo
https://www.quora.com/How-do-I-design-a-steel-silo-and-do-I-need-a-textbook-for-it
https://www.aiche.org/sites/default/files/cep/20131125_1.pdf

Appendix A. Land Documents

Appendix B. Production
Appendix C. Mandi Arrivals
Appendix D. Procurement
Appendix E. Storage Facility