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The National Bank for Agriculture and Rural Development (Nabard) and Origo Commodities India Private Limited have entered into a memorandum of understanding (MoU) to support farmers in Andhra Pradesh (AP) and Telangana (TS) to realise better pricing for their harvest by pledging their produce under Negotiable Warehouse Receipt (NWR) financing.
Origo Commodities is a collateral management company, which allows farmers to make deposits of their produce in its warehouses and obtain pledge financing. It currently operates over 350 warehouses and has over 3.5 million tonnes of commodities with value of over Rs 9,000 crore under management. Its services include commodity handling, collateral management and procurement for farmers, producers, processors and corporate houses. With its network, Origo is stated to be servicing farming community in 14 states in India.
In a similar initiative last year, according to a Nabard press release on Monday, small and marginal farmers were able to realise 20- 30 per cent higher price in TS. This year, Nabard and Origo aim to benefit more farmers in both AP and TS.
Warehouse receipt financing is a tool for monetising the produce without actually selling the commodity at the time of harvest by the farmers to meet their financial requirements. In the case of NWR financing, the farmer is allowed to make a deposit of his harvested crop at a warehouse close to his farm and obtain pledge financing from banks to the extent of 70-75 per cent of the value of the commodity. This scheme enables the farmer to obtain a bridge loan at low interest rates allowing him to avoid a “distress sale” at the time of harvest and wait to sell the produce when the price is right.
This joint initiative between Nabard and Origo will enable farmers to use the warehousing infrastructure of Primary Agriculture Co-operative Societies (PACS) and also more than 100 warehouses managed by Origo across the states of AP and TS. In AP, the initiative will be extended to five districts - West Godavari, Krishna, Kurnool, Guntur and East Godavari in the upcoming harvest season.
“This MoU is going to help farmers to a great extent by realising the right price by offering them options to sell their produce at the right time. The initiative also focuses on Warehousing Development and Regulatory Authority (WDRA) accreditation so that farmers can benefit from post-harvest loans at 7 per cent per annum with interest subvention. We are hopeful that small and marginal farmers who are members of PACS, will participate in this initiative and we will put all efforts along with Origo Commodities to make it a success,” Nabard's chief general manager of AP and TS, Jiji Mammen, stated .
According to Origo director Sunoor Kaul, the initiative will yield significant benefits for farmers. The key to success will be to make rural infrastructure accessible to farmers on the post-harvest side. Origo will extend its support in creating multiple integrated marketing platforms and storage infrastructure to sustain the activities of PACS.
