The successful implementation of the Warehousing (Development & Regulation) Act , 2007 (WDRA) is likely to benefit the secondary market more than actual growers of agricultural commodities, as handling, assaying and certification at one place would minimise the risk of transportation and quality loss.
Today, farmers sell their output to “arahtias” at the price decided by the latter and the real benefit of price hike lies with them. Thus, a majority of farmers get minimum value of goods resulting in distress sale which, in some cases, is even half of the real value in the agricultural mandis.
“The enactment of WDRA will benefit farmers after 2-3 years as they will be able to sell “arahtias” at the price determined by market forces. The benchmark price would be known to farmers. They will be allowed store commodities in nearby warehouses and sell goods in peak season,” said a senior official of the Central Warehousing Corporation (CWC), the public sector custodian of agricultural commodities engaged in assaying, grading and issuing of warehouse receipts also.
As per an estimate, commodities up to 25 per cent are lost because of multiple transportation and poor handling, which if minimised even by 10 per cent, may raise income at least to the tune of Rs 100,000 crore.
The government announced March 1 as the notification date of the WDRA which would make warehouse receipt issued by credible agencies, negotiable. With this, receipts would be able to change hands without any need for physical quality and quantity inspection of commodities. The act will generate huge amount of trust in the system thereby, making the certificate saleable with trust, said Anil Choudhary, managing director of the National Bulk Handling Corporation (NBHC), the warehousing arm of MCX.
But, the benefit to the secondary market will be replicated to farmers also after the maturity of the agricultural market which will take at least two-three years to develop. Today, farmers sale their output largely to “arahtias” without evaluating value of goods in local mandis or government’s announced benchmark price (minimum support price or MSP).
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The system is ambiguous and hence, certain issues need to be addressed before enacting the law, said Sanjay Kaul, managing director of the National Collateral Management Services Ltd (NCMSL), the warehousing arm of the NCDEX.
The act does not have any definite clarification on the tax structure with definite proportion of state and the centre. It also lacks clarity on multiple licensing from the Centre and the state and grading and certification. Therefore, the WDRA is facing more operational issues than legal issues which needs to be clarified before the enactment, said Kaul.
The Parliament approved the WDRA in August 2007 but the notification was delayed because of ambiguity in issues.
The government set up a Committee to study the complex issues and suggest measures to address that. But, a Committee member who wished not to be quoted, said, “Members themselves are differing on issues relating to appointment of depositor, uniform standard of agriculture commodities, multiple licensing, tax structure etc.”