08.02.2010 GLOBAL MEET ON GREEN REVOLUTION II Member AFMA B.B.PATTANAIK MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION NEW DELHI RECENT DEVELOPMENTS

08.02.2010GLOBAL MEET ON GREEN REVOLUTION II

Member AFMA

B.B.PATTANAIK MANAGING DIRECTOR

CENTRAL WAREHOUSING CORPORATIONNEW DELHI

RECENT DEVELOPMENTS ON

WAREHOUSE RECEIPT SYSTEM IN INDIA


Member AFMA

PRESENTATION STRUCTURE

HISTORICAL BACKGROUND.

EXISTING WAREHOUSE RECEIPT SYSTEM.

THE WAREHOUSING (DEVELOPMENT AND REGULATION), ACT 2007.

ITS IMPACT ON AGRI BUSINESS.


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NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING

• WIDESPREAD RURAL INDEBTEDNESS OF FARMING COMMUNITY.

• ROYAL COMMISSION ON AGRICULTURE, 1928 RECOMMENDED

ESTABLISHMENT OF LICENSED WAREHOUSES.

• ALL INDIA RURAL CREDIT SURVEY COMMITTEE, 1954 REITERATED

THE NEED FOR A WAREHOUSING SYSTEM IN PUBLIC SECTOR.


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NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING

• WAREHOUSING BEING CAPITAL INTENSIVE WITH LOW RETURNS,

PRIVATE SECTOR WAS SHY OF INVESTMENT AND HENCE PUBLIC

SECTOR WAS INEVITABLE

• AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING)

ACT, 1956 WAS ENACTED, LATER REPEALED AND REPLACED BY

WAREHOUSING COPORATIONS ACT, 1962.

• CENTRAL & STATE WAREHOUSING CORPORATIONS (CWC &

SWCs) WERE ESTABLISHED UNDER THIS ACT.


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EXISTING WAREHOUSE RECEIPT SYSTEM

• WAREHOUSE RECEIPT - A RECEIPT IN THE PRESCRIBED FORM, ISSUED BY A WAREHOUSEMAN, TO ANY PERSON DEPOSITING GOODS

IN THE WAREHOUSE.

• THE LICENCED WAREHOUSEMAN IS AUTHORISED TO ISSUE A

NEGOTIABLE OR A NON- NEGOTIABLE WAREHOUSE RECEIPT.

• WAREHOUSE RECEIPT IS A DOCUMENT OF TITLE TO GOODS AS PER

THE SALE OF GOODS ACT, 1930.


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• THE WAREHOUSING RECEIPTS AT PRESENT DO NOT ENJOY THE FIDUCIARY TRUST OF DEPOSITORS AND BANKS, AS THERE IS FEAR OF NOT BEING ABLE TO RECOVER THE LOANS IN EVENTS, SUCH AS FRAUD, OR MIS-MANAGEMENT ON BEHALF OF THE WAREHOUSE OR INSOLVENCY OF DEPOSITOR.

• THE AVAILABLE LEGAL REMEDIES ARE ALSO TIME CONSUMING AND INADEQUATE. FURTHER, THE FORMAT OF WAREHOUSE RECEIPTS USED IN THE COUNTRY IS NOT UNIFORM.

• HENCE, THERE ARE IMPEDIMENTS IN THE NEGOTIABILITY OF WAREHOUSE RECEIPTS CREATING DIFFICULTIES TO THE FARMERS AND OTHER DEPOSITORS OF GOODS.



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• THEREFORE, NEED WAS FELT TO ESTABLISH A NEGOTIABLE WAREHOUSE RECEIPT SYSTEM FOR ALL COMMODITIES INCLUDING AGRICULTURAL COMMODITIES.

• ON ONE HAND, IT WILL MAKE WAREHOUSE RECEIPTS A PRIME TOOL OF TRADE AND FACILITATE FINANCE AGAINST IT THROUGHOUT THE COUNTRY, THUS HELPING THE FARMING COMMUNITY.

• ON THE OTHER, IT WILL ALLOW BANKS TO IMPROVE QUALITY OF THEIR LENDING PORTFOLIO AND ENHANCE THEIR INTEREST IN

LENDING IN RESPECT OF GOODS DEPOSITED IN WAREHOUSES.



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OBJECTIVES & EXPECTED BENEFITS

THE ACT INTENDS TO LAYDOWN REQUIREMENTS FOR

WAREHOUSE RECEIPT TO BECOME VALID NEGOTIABLE

INSTRUMENT.

THE MAIN OBJECTIVE OF THE ACT IS TO ENCOURAGE

SCIENTIFIC WAREHOUSING OF GOODS, LOWERING THE COST OF

FINANCING, ENSURING A SHORTER SUPPLY CHAIN,

ENHANCING REWARDS FOR GRADING AND QUALITY AND

PROVIDING FOR BETTER PRICE RISK MANAGEMENT.


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OBJECTIVES & EXPECTED BENEFITS

THE INTRODUCTION OF A NEGOTIABLE WAREHOUSE RECEIPT

WOULD INCREASE LIQUIDITY IN RURAL AREAS AND WOULD

GIVE A SAFETY NET TO FARMERS AGAINST DISTRESS SALE.

THOUGH, THE MINIMUM SUPPORT PRICE OPERATIONS TAKE

CARE OF A NUMBER OF CROPS, THE ABILITY OF THE FARMER TO

KEEP HIS SURPLUS GOODS IN SCIENTIFIC WAREHOUSE AND

OBTAIN INSTITUTIONAL CREDIT ON THE BASIS OF SUCH RECEIPTS

HAS BEEN HAMPERED DUE TO ABSENCE OF AN

APPROPRIATE LEGISLATION, WHICH ENABLES THE SAME.


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• AVOID DISTRESS SALE BY FARMERS

• ENCOURAGE SCIENTIFIC WAREHOUSING OF GOODS.

• LOWER COST OF FINANCING AS A RESULT OF REDUCED

RISK

ADVANTAGES OF

NEGOTIABLE WAREHOUSE RECEIPT SYSTEM

• SHORTER AND MORE EFFICIENT SUPPLY CHAINS.

• INCREASED TRADE & FINANCE IN COMMODITIES.

• HIGHER RETURNS TO FARMERS AND BETTER

SERVICES TO CONSUMERS


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BENEFITS TO FARMERS

1. EASY AVAILABILITY OF LOANS FROM BANKS.

2. REAL & EFFECTIVE RECOURSE & INSTRUMENT TO AVOID DISTRESS SALE.

3. PROPER GRADING OF THE STOCKS RESULTING IN BETTER UNDERSTANDING & INCREASED REALIZATION OF THE VALUE.

4. INCREASED CONFIDENCE DUE TO WELL LAID ACCOUNTABILITY & PENALTY CLAUSES FOR ALL SERVICE PROVIDERS.

5. QUICK & EFFECTIVE LOSS COMPENSATION & DISPUTE SETTLEMENTS


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• REGISTRATION OF WAREHOUSES AND ACCREDITATION AGENCIES.

• LIABILITIES, DUTIES AND LIEN OF WAREHOUSE MAN

• FORMAT OF WAREHOUSE RECEIPT

• CONDITIONS FOR NEGOTIABILITY OF WAREHOUSE RECEIPT BY DELIVERY

AND ENDORSEMENT.

• ISSUE OF DUPLICATE WAREHOUSE RECEIPT.

• THE WAREHOUSING DEVELOPMENT AND REGULATORY AUTHORITY (WDRA)

• WAREHOUSING ADVISORY COMMITTEE

• POWERS OF CENTRAL GOVERNMENT.

• APPEALS.

• OFFENCES AND PENALTIES

THE WAREHOUSING (DEVELOPMENT & REGULATION)ACT, 2007


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WAREHOUSE RECIEPT

• MAY BE EITHER IN WRITING OR IN ELETRONIC FORM

• SHALL BE A DOCUMENT OF TITLE TO GOODS IN WRITING IF IT CONTAINS ALL THE FOLLOWING

PARTICULARS, NAMELY:

• WAREHOUSE RECIEPT(WR) NUMBER

• WAREHOUSE REGISRATION NUMBER & DATE OF VALIDITY

• NAME OF WAREHOUSE & POSTAL ADDRESS

• NAME & ADDRESS OF DEPOSITOR

• DATE OF ISSUE OF WR

• STATEMENT THAT THE GOOD RECEIVED SHALL BE DELIVERED TO THE HOLDER OR TO THE

ORDER OF A NAMED PERSON

• RATES OF STORAGE & HANDLING CHARGES

• DESCRIPTION OF GOODS, QUANTITY & QUALITY OR GRADE

• MARKET VALUE AT THE TIME OF DEPOSITCont…


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WAREHOUSE RECIEPT

• PRIVATE MARKS OF DEPOSITOR ON THE GOODS OR PACKAGES, IF ANY, EXCEPT IN

CASE OF FUNGIBLE GOODS

• NAME OF INSURANCE COMPANY

• WHETHER WR IS NEGOTIABLE OR NON NEGOTIABLE

• STATEMENT OF THE AMOUNT OF NY ADVANCE MADE OR ANY LIABILITY INCURRED

FOR WHICH THE WAREHOUSE MAN CLAIMS HIS LIEN

• DATE & SIGNATURE OF THE WAREHOUSE MAN OR HIS AUTHORIZED AGENT

• DECLARED SHELF LIFE OF GOODS

• THE FACT THAT THE WAREHOUSE MAN HOLDS THE LEAN ON THE GOODS FOR HIS

STORAGE AND HANDLING CHARGES

• THAT THE RECIEPT WOULD BE VALID TILL THE EXPIRY OF DECLARED SHELF LIFE


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REGULATION OF WAREHOUSING BUSINESS

NO PERSON SHALL COMMENCE OR CARRY ON THE WAREHOUSING BUSINESS BY ISSUING

NEGOTIABLE WAREHOUSE RECEIPT UNLESS HE HAS OBTAINED A REGISTRATION

CERTIFICATE IN RESPECT OF THE CONCERNED WAREHOUSE OR WAREHOUSES GRANTED

BY THE AUTHORITY UNDER THIS ACT.

THE WDRA MAY NOT GRANT A CERTIFICATE OF REGISTRATION UNLESS IT IS SATISFIED

THAT THE WAREOUSE IN RESPECT OF WHICH THE APPLICATION HAS BEEN MADE HAS

ADEQUATE FACILITIES AND SAFEGUARDS REQUIRED TO WAREHOUSE THE GOODS BESIDES

SATISFYING FINANCIAL, MANAGERIAL AND OTHER ELIGIBILITY CRITERION.


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WAREHOUSE RECEIPT SYSTEM

WAREHOUSE

WAREHOUSERECEIPT

PLEDGING

BANKING/FINANCIAL INSTITUTION

INSPECTIONGRADING

INSURANCE

FARMEREXPORTER

PROCESSOR


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IMPACT OF THE ACT ON AGRI BUSINESS

The warehousing (Development and Regulation ) Act 2007 will have following impacts on Agri-Business

– Farmers would be encouraged to store their produce in registered warehouses.

– Grading and quality standards of agriculture commodities would be encouraged.

– Farmers will get better return of their produce.

– There will be demand for scientific warehouses in rural areas

– The losses in storage of agricultural produce would drastically be reduced


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IMPACT OF THE ACT ON AGRI BUSINESS

•Farmers would be able to get loan from banks against negotiable warehouse receipt.

•Liquidity in rural areas would be enhanced.

•Better and transparent price discovery mechanism for farmers’ produce

•Short supply chain in agriculture commodities


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OPPORTUNITY – AGRI BUSINESS

FARMERS

• Availability of better storage infrastructure & standardized

storage charges

• Easy accessibility to finance

• Lower finance costs

• Will facilitate trade in commodities without physical handling

of the stocks. Ease of selling of agri produce.


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WAREHOUSE MAN

• To benchmark their infrastructure & quality of services

against the best in the world

• increased business opportunities from stake holders

• Regulatory defined rights , roles & responsibilities


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FINANCIAL INSTITUTIONS & INSURANCE COMPANIES

• Assurance of dealing with accredited warehouses

• Increased risk mitigation from negotiability of WR

• Assurance that goods of the quality & quantity as mentioned in the WR

are stored in the warehouse and shall be delivered to the ‘holder in due

course’

• Lower transaction costs & reduced time involvements towards stressed

assets

• Lower ‘ Re-insurance’ premiums as dealing with accrediated warehouses

• Assurance against risks of theft, pilferage, quality & quantity losses, etc.

• Faster disposal of insurance claims


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CHALLENGES

• Timely accreditation of vast warehousing network

• Requirement of high quality manpower to roll out

processes and meet commitments

• Ensuring smooth periodic audits and implementation of

required Warehousing standards on pan India basis

• Creating scientific storage structures

• Developing standards/grade specifications for all

agricultural commodities

• Developing expertise in grading of commodities


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Documents

08.02.2010 GLOBAL MEET ON GREEN REVOLUTION II Member AFMA B.B.PATTANAIK MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION NEW DELHI RECENT DEVELOPMENTS