The introduction of a negotiable warehouse receipt (WR) system and its effective enforcement through the Warehousing Development and Regulatory Authority (WDRA), 2007, is likely to bring all-round development in the agri commodity sector.
According to industry insiders, it is set to benefit remote agrarian Indian villages the most, with significant control over distress sale in agricultural commodities during the harvesting season.
Today, most farmers in remote, under developed states are barred from government benefits, including the minimum support price (MSP) due to non-availability of Food Corporation India (FCI) warehouses. A majority of FCI godowns are set up in district centres where farmers from remote areas have no access. The distance forces farmers to sell their products to local arhatiyas or money landers at a discount of 40-45 per cent.
Effective implementation of WDRA, which was enforced by notification in the official Gazette on October 26, is expected to reduce distress sale. “The major objective of WDRA is to attract big corporates as major investors, especially in remote Indian villages. Although, the government incentivised this sector by writing off the amount invested in warehouses in other income group, investors were, so far, hesitant due to the government’s frequent interventions through stock limit, local taxes, etc.” said Anil Choudhary, managing director of Financial Technologies promoted National Bulk Handling Corporation (NBHC).
Marginal incentives of 20-25 per cent of the total investment was not adequate to lure investors to warehouses as a long-term business proposition. They required market-linked incentivise as an assurance from the government for an intervention-free business proposition.
The Act was enacted by the Parliament in September, 2007. Besides mandating the negotiability of WR, it prescribes the form and manner of registration of warehouses.
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According to the notification, the Authority shall consist of a chairperson and will have not more than two members. The government has, understandably, appointed Dinesh Rai, a 1974 batch IAS officer of the Uttar Pradesh cadre, as the chairman of the Authority.
The regulatory authority has been assigned to register and accredit warehouses intending to issue negotiable WRs and to put in place a system of quality certification and grading of commodities to protect the interests of holders of warehouse receipts against negligence, malpractices and fraud.