Farmers may soon start trading electronic warehousing receipts on e-NAM

The receipt will get the cultivator the best price for his produce. He can also obtain finance against it

Integration of electronic negotiable warehousing receipts (e-NWR) with the Electronic National Agriculture Market or eNAM, as announced by the Finance minister in her Budget speech on Saturday, is expected to be complete in one or two months.

Warehouse receipts are issued by repositories who keep electronic records of goods deposited in a warehouse and subsequent transfers, in much the same way as depositories operate in the capital market. However, receipts for warehoused goods can now also be negotiable and hence tradable. CDSL Commodity Repository Limited, a repository set up by the CDSL, has already been integrated and has begun issuing e-NMR for goods traded on eNAM.

Another repository, the NERL set up by the NCDEX, is in the process of integration.

Kedar Deshpande, Managing Director and CEO, NERL said, “Keeping in sync with the Government’s directive, we are already in the process of integrating our repository platform with eNAM. This integration will help farmers to participate in auctions by storing quality produce in registered warehouses of WDRA, which is already widening its network of warehouses across the country. This means registered warehouses will become market yards, marking the beginning of warehouse-based sales in India. As an approach this could be the best way of making eNAM a countrywide success.”

The e-NWR will be useful when farmers deposit their produce in warehouse regulated by the Warehouse regulator and that warehouse has to be notified as a sub-mandi or market yard. The Government has already asked states to follow the model APMC Act which also mandates notifying warehouses as market yards. Andhra Pradesh and Telangana have already notified over 40 warehouses as market yards. At least 15 other states have conveyed to the Union Agriculture ministry that they are considering this.

eNAM is a national networked platform connecting mandis or Agriculture Produce Marketing Committees electronically for helping the farmer realise the best price for his produce in the state from where he is selling. In physical mandis, the farmer gets the prevailing price in that mandi or the APMC to which he has brought his produce. However, eNAM connects all mandis in the state and all states in a national network. Hence farmers can get the best price prevailing in any mandi of that state if sold electronically.

With electronic negotiable warehouse receipts gaining traction on the commodity derivatives exchanges, government was in discussion with market participants to promote and facilitate issue of such warehouse receipts on eNAM platforms. The utility of these receipts is that they can be used for obtaining finance from banks and can also obviate the delivery of physical commodities.

On electronic market platforms such as eNAM, a farmer needn't bring physical commodities and must only produce electronic warehouse receipts issued against the goods deposited by him in a regulated warehouse. Based on these receipts, his goods will be up for sale and he will get the best price, while the buyer will get the receipt, and repository will debit the farmer and credit the commodity in the buyer’s name.

The farmer can also obtain finance against such receipts and hold the underlying goods till he gets better price, avoiding distress sale at the mandis, in the process.

Why Integration Matters

eNAM, ministry of Agriculture, department of economic affairs and two repositories are discussing integration
 

One repository integrated with the network, another at advanced stage
 

States have to notify regulated warehouses as APMCs
 

AP, Telangana have already notified 40 warehouses as mandis
 

A farmer depositing commodities in such warehouses will get e-NWR
 

Farmer than can deliver such e-NWR instead of delivering his produce.
 

He can also get finance and wait for right price to sell
 

As on December 31, 2019, NERL generated over 180,000 eNWRs/eWRs against 1.4 million tonne of commodities
 

Total Rs 6,000 crore Finance given against e-NWR issued by both repositories combined