AUM of commodities under warehousing financing show pick-up in FY23: NCML

India's assets under management (AUM) of commodities against warehouse receipts has seen a sharp decline of almost 75 per cent in the last five years (2016-17 to 2021-22) due to downturn in the commodity cycle, impact of Covid on overall economic activities that made banks wary of lending to the sector and frequent ban on stocking of commodities to control inflation, Sanjay Gupta, MD and CEO of National Commodities Management Services Ltd (NCML) said.

However, the good part is that since the start of FY23 things have started looking up and the sector will get further boost if the government lifts the clampdown in futures trading in many commodities as physical players who want to stock to hedge their risks will come back into the market.

“There are two developments that make us hopeful, first is the stock holding limits on big wholesalers and retailers is being gradually relaxed which will make stocking profitable and secondly, there is possibility of the ban on futures trading in several major commodities getting lifted,” Gupta told Business Standard.

NCML, which was formerly known as the National Collateral Management Services Limited, is one of the country’s largest and integrated post-harvest solution providers offering a bouquet of services along the entire supply chain in the commodity space.

Gupta said that out of the total Rs 20,000-25,000 crore AUM of commodities under warehousing receipts, NCML commands a share of 15-20 per cent.

It currently manages around 800 warehouses across the country of which almost 40 are owned by NCML.

“Over the last few years, the business is also getting transformed and a lot of receipts are now electronically generated which is given only by WDRA recognised warehouses,” Gupta said.

But, so far, just around 5-10 per cent of the total warehouse receipts are electronically generated while the rest are generated physically.

Banks give loans against warehouse receipts of both kinds, electronically and physical.

On NCML’s expansion plans, Gupta said that the company has partnered with Food Corporation of India (FCI) for building and operating 10 steel silos each having a capacity of 50,000 tonnes with railway sidings. 

“These silos have an agreement for 30 years with FCI for which the Corporation will pay rental under the DBFOO (design, built, finance, own and operate) basis for the silos,” Gupta said.

He said of the 10 silos, two are already operational in Haryana, while another three (two in Punjab and one in UP) will get operational this year.

“First Covid and then the farmers’ agitation impacted some of our plans to build the silos or else several of the projects would have been already on ground,” he said.

Gupta said that the Centre’s marquee scheme for building farm-gate storage infrastructure, the Agriculture Infrastructure Fund (AIF) is mostly for small and retail players in the sector and not hugely attractive for big ones because the cap of Rs two crore on project cost for availing the subsidy that makes them unviable for big investors.