Launch of Negotiable Warehouse Receipt System 26th April, 2011

Speech of the Hon’ble Minister of State
(Independent Charge),Ministry of Consumer Affairs,
Food and Public Distribution for 26th April, 2011 on “Launch of Negotiable Warehosue Receipt System”


Shri Dinesh Rai, Chairman, Warehousing Development and Regulatory Authority.
Dr. B. C. Gupta, Secretary, Food & Public Distribution, Government of India.
Shri B. B. Pattnaik, MD, Central Warehousing Corporation.
Shri Girish Shanker, Joint Secretary – Storage, Department of Food & Public Distribution, Government of India.
Shri Karnail Singh, Member, Warehousing Development and Regulatory Authority
Shri B. K. Bal, Member, Warehousing Development and Regulatory Authority

Distinguished Guests, Warehousemen from different organizations, Representatives of Central and State Governments, Ladies and Gentlemen.

*****

I am delighted to be present today on the occasion of launching of the Negotiable Warehouse Receipt Systems first time in the country. Henceforth, the warehouse receipts issued by the warehouses registered with the Warehousing Development and Regulatory Authority would become a fully negotiable instrument backed by a Central Legislation. Banks will have more faith in such negotiable warehouse receipts and farmers would be able to seek loans easily against these receipts.

Although, the concept of Negotiable Warehouse Receipt is very old, in the year 2000, the World Bank carried out a study for the Forward Market Commission and Government of India for the Development of Warehouse Receipt Systems for Agriculture in India. The main conclusion of the Report was that warehouse receipt may be used attractively by the Banks to lend to the agricultural sector. Besides, it can also reduce the cost of public support for agricultural marketing and improve price risk management.

Subsequently, Working Group on Warehouse Receipts and Commodity Futures constituted by the Reserve Bank of India in April, 2005 recommended for Negotiable Warehouse Receipts to protect farmers against distress sale of their agricultural produce in the market and also to increase liquidity in the rural areas. As a result of which the Government of India enacted the Warehouse (Development and Regulation) Act, 2007 and made it effective from 25th October, 2010.

The Act will make the negotiable warehouse receipt a prime tool of trade and facilitate finance against it throughout the country. It will also allow Banks to improve the quality of their lending services and enhance their interest in lending in respect of agricultural goods deposited by farmers in the registered warehouses. It is expected that the system of Negotiable Warehouse Receipts would result in providing considerable benefits, both at macro as well as micro levels. It will increase the liquidity in the rural areas, encourage scientific warehousing of goods, improve supply chain and enhance rewards for grading and quality and better price risk management. This would results in higher return to the farmers and better services to the consumers.

Chairman, WDRA has informed that there is good response from the warehousing sector and about 318 applications with a warehousing capacity of over 11 Lakh MTs have been received from different states for registration under the Warehousing Act. I have also been informed that these warehouses would be accredited by approved accreditation agencies prior to their registration with the Warehousing Development and Regulatory Authority to ensure that basic requirements of scientific storage of agricultural and other commodities are fully met by these warehouses.

WDRA will also initiate other developmental plan to promote efficiency in the conduct of the warehousing business. There is shortage of warehousing capacity in the country. Substantial quantity of wheat procured by the Food Corporation of India in Northern States is stored in the open complexes, wherein losses due to heavy rains, floods and cyclones cannot be ruled out. Therefore, it is imperative that world class warehousing facilities for all commodities, including agricultural commodities, are created in the country. These warehouses should be equipped with the latest devices handling, grading, storage and transportation of different commodities.

Training is an important aspect for warehouses and all the warehousemen, both from public, private and cooperative sectors should be imparted proper training of scientific storage of goods. They should be aware about the code of practices of scientific storage of all agricultural commodities so that the storage and transit losses in these commodities are minimized. The Authority should arrange training of warehousemen and other stakeholders of the warehousing sector through some expert institutions as well as awareness programmes for farmers in different part of the country. Regional Conferences in association with FICCI and ASSOCHAM should also be organised to create awareness about negotiable warehouse receipts. WDRA should also promote efficiency in the cold chain sector in association with National Horticulture Board (NHB) so that the scientific storability and marketing of commodities such as onions and potatoes gets streamlined and the losses in fruits, vegetables and other processed food items are minimised.

I understand that availability of finance to farmers particularly small and marginal ones at around 11% rate of interest is creating hardships. I have already taken up this issue with the Ministry of Finance. I am confident that in due course, efforts would be made to get crop loan facilities at concessional rate of 4% extended to post-harvest management loan, which will incentivise farmers to store their produce in these warehouses at the cheapest available rate of interest. I will advise that Authority should provide linkage of registered warehouses with APMC and Spot Exchanges so as to enable the farmers to fetch better prices of their agriculture produce.
I would urge all the warehousemen who have come from different parts of the country to sincerely work together for creating awareness among farmers, traders and other depositors about the benefits of Negotiable Warehouse Receipts. I congratulate Chairman and all other Members of the WDRA for introducing the Negotiable Warehousing Receipt System in the county. I wish them all success.

********