NCDEX plans JV unit certify warehouse network

The National Commodities and Derivatives Exchange of India (NCDEX) will promote a collateral management company, National Collateral Management Services Limited (NCMSL), to undertake the identification, accreditation, and networking of warehouses.

Speaking on the sidelines of a seminar on 'Commodities brokerage', PH Ravikumar, managing director of NCDEX, said, "The company will follow a franchising arrangement and identify warehouses in the district level to set up a network between neighbouring clusters of warehouses. "

He added the company will work towards setting up a central grading and certifying facility.

Punjab National Bank, Canara Bank and ICICI Bank had agreed in principle to back the initiative. NCDEX was in talks to rope in a few more commercial banks.

Ravikumar said, "The company will ensure good internal logistics management at warehouses and this in turn will provide a comfort level to banks as the warehouses will be graded."

He added, "Through this initiative, the credit worthiness of the farmer will also improve. Better warehousing will also provide employment opportunities in the regions of operation".

Once warehouse receipts (WRs) were accepted as negotiable instruments, Wrs would facilitate further lending to farmers. As many as 19 existing warehouses would come under the new company. NCDEX was aiming to bring over 600 into the fold.

Ravikumar said no decision had yet been taken on whether the warehouses would operate on the basis of common commodities across the entire nation, or whether they would operate on geographical lines.

"The company should be functional within the next three to four months. The farmers are aware and bullish about the system." he said.

NCDEX has tied up with the Centre for Monitoring Indian Economy (CMIE) and CRISIL for price dissemination of commodities to farmers through rural kiosks.