ROLE OF WAREHOUSES

1
ROLE OF WAREHOUSES IN COMMODITY MARKETING
I.C.CHADDA MANAGER (TECH)
2
NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING

• WIDESPREAD RURAL INDEBTEDNESS OF FARMING
  COMMUNITY.
• ROYAL COMMISSION ON AGRICULTURE, 1928 RECOMMENDED
  ESTABLISHMENT OF LICENSED WAREHOUSES.
• ALL INDIA RURAL CREDIT SURVEY COMMITTEE, 1954
  REITERATED THE NEED FOR WAREHOUSING IN PUBLIC
  SECTOR.
• 
  Contd.

3
NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING

• AS WAREHOUSING NEEDS HUGE CAPITAL INVESTMENT WITH
  LOW RETURNS PUBLIC SECTOR WAS INEVITABLE
• AGRICULTURAL PRODUCE (DEVELOPMENT WAREHOUSING
  CORPORATION) ACT, 1956 WAS PASSED AND LATER ON
  REPEALED AND REPLACED BY WAREHOUSING COPORATION
  ACT, 1962 FOR CREATION OF WAREHOUSING.
• CENTRAL STATE WAREHOUSING CORPORATIONS (CWC
  SWCs) WERE ESTABLISHED UNDER THIS ACT.

4
LICENSING OF WAREHOUSES FOR SOUND WAREHOUSE
RECEIPT SYSTEM

• THE STATES ENACTED UNIFORM WAREHOUSE ACTS RULES
  DURING 1956 1960 FOR SUPERVISION AND REGULATION
  OF WAREHOUSING OPERATIONS.
• IT PROVIDES FOR SOUND AND RELIABLE WAREHOUSE
  RECEIPT SYSTEM AT PAR WITH DEVELOPED ECONOMIES.

5
WAREHOUSING

• AN ECONOMIC ACTIVITY
• CONCOMITANT TO AGRICULTURE
• CLOSELY LINKED WITH AGRO INDUSTRIAL
  DEVELOPMENT TRADE

6
WAREHOUSING INFRASTRUCTURE (CAPACITY IN MILLION
TONNNES A ON 01-04-2006)
DESCRIPTION CWC SWC TOTAL
TOTAL NO. OF 507 1594 2101 WAREHOUSE
CAPACITY 10.03 19.70 29.73
1MT6Sq.FT
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NET WORTH OF CENTRAL WAREHOUSING CORPORATION
(Rs. IN CRORES)
NET WORTH PAID UP CAPITAL FREE RESERVES
DEFERRED REVENUE
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COMMODITY TRADING

• A COMMODITY FUTURES CONTRACT SPECIFICATIONS KNOWN
  AS CONTRACTS SPECIFICATIONS DEFINE THE RELEVANT
  GRADE AND QUALITY OF THE MATERIAL
• EACH COMMODITY IS DIFFERENT AS SUCH UNDERTAKING
  OF FUTURE CONTRACTS SPECIFICATIONS IS AT THE
  HEART OF KNOWING RULES THAT GOVERN TRADING IN
  COMMODITY FUTURES AS WELL AS PRICE MOVEMENT AND
  VALUE OF EACH COMMODITY.

9
ESSENTIAL FEATURES OF A DELIVERY MECHANISM

• SCIENTIFIC STORAGE AGENCY HAVING
• EXPERTISE IN GRADING OF THE STOCKS.
• SCIENTIFIC STORAGE FACILITIES.
• EXPERTISE IN SCIENTIFIC PRESERVATION OF THE
  COMMODITIES.
• AUTHORISED TO ISSUE A WAREHOUSE RECEIPT.

10

WHY GRADING

• ESSENTIAL WAREHOUSING TOOL FOR ASSESSMENT OF
  QUALITY OF THE PRODUCE.
• IT DETERMINES THE STORABILITY AND PRESERVATION
  NEED OF THE PRODUCE.
• SATISFIES THE NEED OF BANKERS IN ADVANCING LOANS.
• GRADING NOT ONLY FACILITATES THE DISSEMINATION OF
  PRICES AND MARKET INFORMATION BUT ALSO ASSIST
  SYSTAMATIC DISTRIBUTION AT ALL STAGES.

11
GRADING AND COMMODITY TRADING

• QUALITY GRADING NOT ONLY FACILITATES ITS
  MARKETING BUT ALSO HELP SELLERS AND BUYERS TO
  CHOOSE A PARTICULAR COMMODITY.
• GRADED GRAINS ARE LIKELY TO BE MORE EQUITABLY
  PRICED THAN NON-STANDARDISED GRAINS.
• SUCH STANDARDS BRING STABILITY IN PRICES AND
  ENSURE QUALITY.
• STANDARDS CAN ALSO SERVE AS CONSUMER PROTECTION
  INSTRUMENT AND MINIMISE ADULTERATION.

12
WAREHOUSE RECEIPTS A TOOL FOR

• SOFTENING THE RIGIDITY INVOLVED IN HANDLING
  COMMODITIES
• BETTER CREDIT DELIVERY.
• BETTER LOAN RECOVERY FOR FINANCIAL INSTITUTIONS.
• CONVENIENCE IN ASSET MANAGEMENT.
• MARKET INSTRUMENT FOR DEVELOPING INDIAN
  ECONOMY.

13
SOUND RELIANCE WAREHOUSE RECEIPT SYSTEM

• ASSISTS IN ORDERLY MARKETING BY INTRODUCTION OF
  STANDARD GRADE SPECIFICATIONS.
• WAREHOUSE RECEIPT SYSTEM CAN PLAY SIGNIFICANT
  ROLE IN REDUCING THE PRESSURE ON THE GOVT. TO
  CARRY LARGE INVENTORY OF THE AGRICULTURAL
  PRODUCE.

14
WAREHOUSEMANS LIABILITY

• IT IS THE LIABILITY OF THE WAREHOUSEMAN TO
  RETURN ON DEMAND OR SURRENDER OF THE WR, THE
  GOODS OF THE SAME QUALITY AND QUANTITY (SUBJECT
  TO NATURAL LOSS DURING STORAGE DUE TO SHRINKAGE
  ETC.) WHICH WERE TENDERED FOR STORAGE BY THE
  DEPOSITOR.

15
WORKING OF WAREHOUSE RECEIPT SYSTEM
WAREHOUSE RECEIPT
INSPECTION GRADING INSURANCE
PLEDGING
WAREHOUSE
BANKING/FINANCIAL INSTITUTION
PRODUCER EXPORTER PROCESSOR
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ADVANTAGES OF WAREHOUSE RECEIPT SYSTEM

• PROVIDES FINANCIAL FLEXIBILITY TO FARMERS/
  PROCESSORS /TRADERS.
• SAVES FARMERS FROM DISTRESS SALES DURING CROP
  SEASON.
• ENHANCES VOLUME OF BUSINESS AND PRODUCTIVITY.
• REDUCES SEASONAL PRICE VARIATIONS.
• IMPROVES EFFICIENCY OF MARKETING SYSTEM.

17
TRANSFERABILITY OF WAREHOUSE RECEIPT

• STATE WAREHOUSE ACTS PROVIDE NEGOTIABLE /
  NON-NEGOTIABLE IN THE PRESCRIBED FORM OF
  WAREHOUSE RECEIPT.
• THE STATE WAREHOUSES ACTS ALSO PROVIDE THAT
  UNLESS OTHERWISE SPECIFIED IN THE WR, A RECEIPT
  ISSUED BY WH MAN IS TRANSFERABLE BY ENDORSEMENT
  AND SHALL MAKE ITS LAWFUL HOLDER TO RECEIVE THE
  GOODS SPECIFIED IN IT, ON THE SAME TERMS AND
  CONDITIONS, ON WHICH THE PERSON WHO ORIGINALLY
  DEPOSITED THE GOODS, WOULD HAVE BEEN ENTITLED TO
  RECEIVE THEM.

CONTD./--
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• WR IS A DOCUMENT OF TITLE TO GOODS AS PER THE
  SALE OF GOODS ACT, 1930.
• A PERSON TO WHOM WAREHOUSE RECEIPT IS NEGOTIATED,
  ACQUIRES A TITLE TO THE WAREHOUSE RECEIPT, THE
  RIGHT OF POSSESSION OF THE GOODS COVERED BY THE
  WAREHOUSE RECEIPT AND THE RIGHT TO REQUIRE THE
  WAREHOUSE MAN TO HOLD OR DELIVER THE GOODS
  ACCORDING TO THE TERMS OF WAREHOUSE RECEIPT.

CONTD./--
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• HENCE, THE WR ENJOYS THE ADVANTAGE OF NEGOTIABLE
  INSTRUMENT.
• BUT AS PER NEGOTIABLE INSTRUMENT ACT, 1881,
  WAREHOUSE RECEIPT IS NOT A NEGOTIABLE INSTRUMENT.
• WHEREAS RAILWAY RECEIPT, LORRY RECEIPT, BILL OF
  LADING THOUGH NEGOTIABLE BY ENDORSEMENT ARE ALSO
  NOT NEGOTIABLE INSTRUMENTS AS PER N.I.ACT, 1881.
• ALL THESE INSTRUMENTS ARE ACCEPTED BY COMMERCIAL
  BANKS AS COLLARAL / SECURITY AGAINST GOODS
  COVERED BY THEM.

20
WAREHOUSING COMPANIES AS INDEPENDENT AGENTS

• EVERY WAREHOUSEMAN RESPONSIBLE FOR ALL NECESSARY
  PRECAUTIONS FOR SCIENTIFIC STORAGE.
• EVERY WAREHOUSEMAN RESPONSIBLE TO TAKE INSURANCE
  OF THE GOODS STORED WITH HIM.
• WAREHOUSEMAN CAN NOT LEND MONEY AGAINST GOODS IN
  WAREHOUSE.
• 
  Contd.

21
WAREHOUSING COMPANIES AS INDEPENDENT AGENTS

• THE INSPECTION, SAMPLING, WEIGHMENT AND GRADING
  BY A LICENCED WAREHOUSING COMPANY ARE MORE
  DEPENDABLE THAN COLLATERAL MANAGERS AS OUTSIDERS.
• THE NEXT GENERATION IN WAREHOUSE RECEIPTS TO BE
  THE WAREHOUSE WARRANTS WHICH CAN BE MORE SOFTLY
  TRADED THAN NEGOTIABLE WAREHOUSE RECEIPTS.
• THE GENERAL CONDITIONS FOR OPERATION OF WAREHOUSE
  WARRANTS CAN BRING VALUE ADDITION IN WAREHOUSING
  ACTIVITY.

22
NEGOTIABILITY OF THE WAREHOUSE RECEIPTS IS TO BE
USED FOR TRADING, OR ACCEPTED FOR DELIVERY
AGAINST A DERIVATIVE INSTRUMENT SUCH AS FUTURE
CONTRACT. COMMODITY EXCHANGES NEED TO BE
DEVELOPED AS THE MARKET PLACE FOR TRADE IN
WAREHOUSE RECEIPT. HOW ?
23
TRADE IN PHYSICAL SAMPLES ISSUE OF GRADING
CERTIFICATE (GC) ACCREDIT INDEPENDENT
CREDIBLE WAREHOUSES FOR ISSUE OF GC AND
WR TRADE ON WR
24
OBSTACLES IN USAGES OF W.R. IN INDIA

• LACK OF AWARENESS AND TRAINING.
• INAPPROPRIATE TRADING PRACTICES.
• LACK OF APPROPRIATE LEGAL, REGULATORY AND
  INSTITUTIONAL ENVIRONMENT TO SUPPORT WR.
• LIMITED FAMILIARITY OF BANKING COMMUNITY WITH
  WAREHOUSE RECEIPT .

25
REQUIREMENT FOR TRADE IN WR

• RELIABLE AND REPUTABLE WAREHOUSE OPERATORS WITH
  GOVT. REGULATION.
• APPROPRIATE WAREHOUSING AND COMMERCIAL
  LEGISLATION FOR WAREHOUSE WARRANTS AND DEMAT.

26
FUTURE LEGISLATION

• NEGOTIABLE WAREHOUSE RECEIPTS BILL AS A PART OF
  REFORMS IN THE FIELD OF AGRICULTURAL MARKETING IS
  UNDER ACTIVE CONSIDERATION OF GOVT. OF INDIA.
• NEW LEGISLATION TO THIS EFFECT WILL ENHANCE
  THE COMPETITIVENESS OF INDIAN AGRICULTURE IN THE
  DOMESTIC AS WELL AS GLOBAL MARKET.

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CHALLENGES AHEAD

• NEED TO ADOPT MARKET -ORIENTED POLICIES
• TO WIN THE CONFIDENCE OF CUSTOMERS.
• EXPERTISE IN GRADING NEW COMMODITIES.
• EFFICIENT AND COST EFFECTIVE STORAGE
  INFRASTRUCTURE TO ENSURE SCIENTIFIC STORAGE.

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FUTURE ?
COMMODITY EXCHANGES
WAREHOUSES
EFFECTIVE COMMUNICATION
THE SYNERGY OF E.W.C. WILL USHER IN NEW ERA OF
AGRICULTURE ECONOMY.
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