The Warehousing Development and Regulatory Authority (WDRA) has received an encouraging response from warehouse keepers to registration and empanelment with spot exchanges. Negotiable warehouse receipts (NWRs) issued by registered warehouses would help farmers seek loans from banks to avoid distress sale during the harvesting season, WDRA Chairman Dinesh Rai told Dilip Kumar Jha. Edited excerpts:
How has been the response to warehouse registration?
The response has been phenomenal. The WDRA has received 370 applications for registration of warehouses from 19 states. We have accredited 220 warehouses so far. Of this, 170 have already been registered with us. The Electronic Warehouse Receipt (EWR) Regulation is in an advanced stage of drafting and once implemented, it will give a further boost to the warehousing sector.
How would the entire system of issuing and trading in NWRs function?
A farmer/depositor will bring his farm produce to a warehouse registered with the WDRA and empanelled with a spot exchange. If he does not have an electronic account or he wants a paper receipt, the NWR will be issued in the physical form. If he wants an EWR, he will have to give details of his demat account, where the EWR will be credited. A warehousemen will do the quality assessment, measure the weight, etc, and pass on the details to the spot exchange and the depository. After receiving confirmation from the spot exchange, the depository will issue the EWR. Thereafter, the farmer/depositor can sell such EWRs on a spot exchange platform. The exchange will guarantee payment to the farmer and delivery of EWR to the buyer. Banks can give finances against such receipts. In this transparent system, there is no question of multiple financing on NWRs.
What are the other roles played by the WDRA?
The WDRA is playing the role of advocacy to solve problems of the warehousing sector for the benefit of farmers. It is also pursuing with the government that the warehousing sector be given the infrastructure status, and crop loan facilities available to farmers at a cheaper rate of interest be extended to post-harvest loans on NWRs.
What are the main advantages of trading in warehouse receipts?
Trading in warehouse receipts would connect farmers and consumers electronically, which will go a long way in eliminating intermediaries and helping higher farm gate and lower consumer prices. The advantages of EWRs over paper warehouse receipts include reduction in manual handling, elimination of transportation of paper warehouse receipts, reduction in chances of forgery and quick access to information. The major benefits of EWRs are accessibility to a large number of buyers nationwide with better bargaining powers and realisation of higher prices by selling graded produce. Also, farmers would be able to avoid distress sale during the harvesting time.
Does that mean higher prices would add to inflation?
The EWR trading would not add to inflation due to transparency in trading of agricultural produce and less physical movement of goods. This will ensure farmers get higher realisation, as the number of intermediaries will come down. But this does not mean prices for the ultimate buyer will go up due to this trading mechanism, hence can not add to the inflationary pressure.
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Will spot exchanges be the only depository for EWRs?
No. Under the present system, there shall be a separate depository, independent of spot exchanges, for trading in EWRs.
What about premium/discounts on NWRs?
Premium and discounts on NWRs are decided by market-driven forces.