Recent Developments ON Warehouse Receipt System in India: Member AFMA

Member AFMA
RECENT DEVELOPMENTS
ON
WAREHOUSE RECEIPT SYSTEM IN INDIA
B.B.PATTANAIK
MANAGING DIRECTOR
CENTRAL WAREHOUSING CORPORATION
NEW DELHI
GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

Member AFMA
PRESENTATION STRUCTURE
 HISTORICAL BACKGROUND.
 EXISTING WAREHOUSE RECEIPT SYSTEM.
 THE WAREHOUSING (DEVELOPMENT AND

REGULATION), ACT 2007.
 ITS IMPACT ON AGRI BUSINESS.

Member AFMA
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 A WAREHOUSING SYSTEM IN PUBLIC SECTOR.

Member AFMA
NEED FOR DEVELOPMENT OF LICENSED

WAREHOUSING
• WAREHOUSING BEING CAPITAL INTENSIVE WITH LOW RETURNS,
PRIVATE SECTOR WAS SHY OF INVESTMENT AND HENCE PUBLIC
SECTOR WAS INEVITABLE
• AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING)

ACT, 1956 WAS ENACTED, LATER REPEALED AND REPLACED BY
WAREHOUSING COPORATIONS ACT, 1962.
• CENTRAL & STATE WAREHOUSING CORPORATIONS (CWC &

SWCs) WERE ESTABLISHED UNDER THIS ACT.

Member AFMA
EXISTING WAREHOUSE RECEIPT SYSTEM
• WAREHOUSE RECEIPT - A RECEIPT IN THE PRESCRIBED FORM,

ISSUED BY A WAREHOUSEMAN, TO ANY PERSON DEPOSITING GOODS IN
THE WAREHOUSE.
• THE LICENCED WAREHOUSEMAN IS AUTHORISED TO ISSUE A

NEGOTIABLE OR A NON- NEGOTIABLE WAREHOUSE RECEIPT.
• WAREHOUSE RECEIPT IS A DOCUMENT OF TITLE TO GOODS AS PER

THE SALE OF GOODS ACT, 1930.

Member AFMA
• THE WAREHOUSING RECEIPTS AT PRESENT DO NOT ENJOY THE FIDUCIARY

TRUST OF DEPOSITORS AND BANKS, AS THERE IS FEAR OF NOT BEING ABLE
TO RECOVER THE LOANS IN EVENTS, SUCH AS FRAUD, OR MIS-MANAGEMENT
ON BEHALF OF THE WAREHOUSE OR INSOLVENCY OF DEPOSITOR.
• THE AVAILABLE LEGAL REMEDIES ARE ALSO TIME CONSUMING AND

INADEQUATE. FURTHER, THE FORMAT OF WAREHOUSE RECEIPTS USED IN
THE COUNTRY IS NOT UNIFORM.
• HENCE, THERE ARE IMPEDIMENTS IN THE NEGOTIABILITY OF WAREHOUSE

RECEIPTS CREATING DIFFICULTIES TO THE FARMERS AND OTHER
DEPOSITORS OF GOODS.

Member AFMA
• THEREFORE, NEED WAS FELT TO ESTABLISH A NEGOTIABLE

WAREHOUSE RECEIPT SYSTEM FOR ALL COMMODITIES INCLUDING
AGRICULTURAL COMMODITIES.
• ON ONE HAND, IT WILL MAKE WAREHOUSE RECEIPTS A PRIME

TOOL OF TRADE AND FACILITATE FINANCE AGAINST IT
THROUGHOUT THE COUNTRY, THUS HELPING THE FARMING
COMMUNITY.
• ON THE OTHER, IT WILL ALLOW BANKS TO IMPROVE QUALITY OF

THEIR LENDING PORTFOLIO AND ENHANCE THEIR INTEREST IN
LENDING IN RESPECT OF GOODS DEPOSITED IN WAREHOUSES.

Member AFMA
OBJECTIVES & EXPECTED BENEFITS
 THE ACT INTENDS TO LAYDOWN REQUIREMENTS FOR

WAREHOUSE RECEIPT TO BECOME VALID NEGOTIABLE
INSTRUMENT.
 THE MAIN OBJECTIVE OF THE ACT IS TO ENCOURAGE

SCIENTIFIC WAREHOUSING OF GOODS, LOWERING THE
COST OF FINANCING, ENSURING A SHORTER SUPPLY CHAIN,
ENHANCING REWARDS FOR GRADING AND QUALITY AND
PROVIDING FOR BETTER PRICE RISK MANAGEMENT.

Member AFMA
OBJECTIVES & EXPECTED BENEFITS
 THE INTRODUCTION OF A NEGOTIABLE WAREHOUSE RECEIPT

WOULD INCREASE LIQUIDITY IN RURAL AREAS AND WOULD
GIVE A SAFETY NET TO FARMERS AGAINST DISTRESS SALE.
 THOUGH, THE MINIMUM SUPPORT PRICE OPERATIONS TAKE

CARE OF A NUMBER OF CROPS, THE ABILITY OF THE FARMER
TO KEEP HIS SURPLUS GOODS IN SCIENTIFIC WAREHOUSE AND
OBTAIN INSTITUTIONAL CREDIT ON THE BASIS OF SUCH
RECEIPTS HAS BEEN HAMPERED DUE TO ABSENCE OF AN
APPROPRIATE LEGISLATION, WHICH ENABLES THE SAME.

Member AFMA
ADVANTAGES
OF
NEGOTIABLE WAREHOUSE RECEIPT SYSTEM
• AVOID DISTRESS SALE BY FARMERS
• ENCOURAGE SCIENTIFIC WAREHOUSING OF GOODS.
• LOWER COST OF FINANCING AS A RESULT OF REDUCED
RISK
• SHORTER AND MORE EFFICIENT SUPPLY CHAINS.

• INCREASED TRADE & FINANCE IN COMMODITIES.
• HIGHER RETURNS TO FARMERS AND BETTER
SERVICES TO CONSUMERS

Member AFMA
BENEFITS TO FARMERS
1. EASY AVAILABILITY OF LOANS FROM BANKS.

2. REAL & EFFECTIVE RECOURSE & INSTRUMENT TO AVOID
DISTRESS SALE.
3. PROPER GRADING OF THE STOCKS RESULTING IN BETTER
UNDERSTANDING & INCREASED REALIZATION OF THE VALUE.
4. INCREASED CONFIDENCE DUE TO WELL LAID ACCOUNTABILITY &
PENALTY CLAUSES FOR ALL SERVICE PROVIDERS.
5. QUICK & EFFECTIVE LOSS COMPENSATION & DISPUTE
SETTLEMENTS

Member AFMA
THE WAREHOUSING (DEVELOPMENT & REGULATION)

ACT, 2007
• REGISTRATION OF WAREHOUSES AND ACCREDITATION AGENCIES.
• LIABILITIES, DUTIES AND LIEN OF WAREHOUSE MAN
• FORMAT OF WAREHOUSE RECEIPT
• CONDITIONS FOR NEGOTIABILITY OF WAREHOUSE RECEIPT BY DELIVERY

AND ENDORSEMENT.
• ISSUE OF DUPLICATE WAREHOUSE RECEIPT.
• THE WAREHOUSING DEVELOPMENT AND REGULATORY AUTHORITY (WDRA)
• WAREHOUSING ADVISORY COMMITTEE

• POWERS OF CENTRAL GOVERNMENT.
• APPEALS.
• OFFENCES AND PENALTIES

Member AFMA
WAREHOUSE RECIEPT
• MAY BE EITHER IN WRITING OR IN ELETRONIC FORM
• SHALL BE A DOCUMENT OF TITLE TO GOODS IN WRITING IF IT CONTAINS ALL THE FOLLOWING

PARTICULARS, NAMELY:
• WAREHOUSE RECIEPT(WR) NUMBER
• WAREHOUSE REGISRATION NUMBER & DATE OF VALIDITY
• NAME OF WAREHOUSE & POSTAL ADDRESS
• NAME & ADDRESS OF DEPOSITOR
• DATE OF ISSUE OF WR
• STATEMENT THAT THE GOOD RECEIVED SHALL BE DELIVERED TO THE HOLDER OR TO THE
ORDER OF A NAMED PERSON
• RATES OF STORAGE & HANDLING CHARGES
• DESCRIPTION OF GOODS, QUANTITY & QUALITY OR GRADE
• MARKET VALUE AT THE TIME OF DEPOSIT

Cont…

Member AFMA
WAREHOUSE RECIEPT
• PRIVATE MARKS OF DEPOSITOR ON THE GOODS OR PACKAGES, IF ANY, EXCEPT IN
CASE OF FUNGIBLE GOODS
• NAME OF INSURANCE COMPANY
• WHETHER WR IS NEGOTIABLE OR NON NEGOTIABLE
• STATEMENT OF THE AMOUNT OF NY ADVANCE MADE OR ANY LIABILITY INCURRED

FOR WHICH THE WAREHOUSE MAN CLAIMS HIS LIEN
• DATE & SIGNATURE OF THE WAREHOUSE MAN OR HIS AUTHORIZED AGENT
• DECLARED SHELF LIFE OF GOODS
• THE FACT THAT THE WAREHOUSE MAN HOLDS THE LEAN ON THE GOODS FOR HIS
STORAGE AND HANDLING CHARGES
• THAT THE RECIEPT WOULD BE VALID TILL THE EXPIRY OF DECLARED SHELF LIFE

Member AFMA

Member AFMA
REGULATION OF WAREHOUSING BUSINESS

NO PERSON SHALL COMMENCE OR CARRY ON THE WAREHOUSING
BUSINESS BY ISSUING NEGOTIABLE WAREHOUSE RECEIPT UNLESS HE
HAS OBTAINED A REGISTRATION CERTIFICATE IN RESPECT OF THE
CONCERNED WAREHOUSE OR WAREHOUSES GRANTED BY THE
AUTHORITY UNDER THIS ACT.
THE WDRA MAY NOT GRANT A CERTIFICATE OF REGISTRATION UNLESS

IT IS SATISFIED THAT THE WAREOUSE IN RESPECT OF WHICH THE
APPLICATION HAS BEEN MADE HAS ADEQUATE FACILITIES AND
SAFEGUARDS REQUIRED TO WAREHOUSE THE GOODS BESIDES
SATISFYING FINANCIAL, MANAGERIAL AND OTHER ELIGIBILITY
CRITERION.
Member AFMA
WAREHOUSE RECEIPT SYSTEM
WAREHOUSE
INSPECTION
RECEIPT
GRADING
INSURANCE
PLEDGING
WAREHOUSE
BANKING/FINANCIAL
INSTITUTION
FARMER
EXPORTER
PROCESSOR

Member AFMA
IMPACT OF THE ACT ON AGRI BUSINESS

The warehousing (Development and Regulation ) Act 2007 will
have following impacts on Agri-Business
– Farmers would be encouraged to store their produce in
registered warehouses.
– Grading and quality standards of agriculture commodities
would be encouraged.
– Farmers will get better return of their produce.
– There will be demand for scientific warehouses in rural areas
– The losses in storage of agricultural produce would
drastically be reduced

Member AFMA
IMPACT OF THE ACT ON AGRI BUSINESS
•Farmers would be able to get loan from banks against

negotiable warehouse receipt.
•Liquidity in rural areas would be enhanced.
•Better and transparent price discovery mechanism for
farmers’ produce
•Short supply chain in agriculture commodities

Member AFMA
OPPORTUNITY – AGRI BUSINESS

FARMERS
• Availability of better storage infrastructure & standardized
storage charges
• Easy accessibility to finance
• Lower finance costs
• Will facilitate trade in commodities without physical handling of
the stocks. Ease of selling of agri produce.

Member AFMA
WAREHOUSE MAN
• To benchmark their infrastructure & quality of services
against the best in the world
• increased business opportunities from stake holders
• Regulatory defined rights , roles & responsibilities

Member AFMA

FINANCIAL INSTITUTIONS & INSURANCE COMPANIES
• Assurance of dealing with accredited warehouses

• Increased risk mitigation from negotiability of WR
• Assurance that goods of the quality & quantity as mentioned in the WR
are stored in the warehouse and shall be delivered to the ‘holder in due
course’
• Lower transaction costs & reduced time involvements towards stressed
assets
• Lower ‘ Re-insurance’ premiums as dealing with accrediated warehouses
• Assurance against risks of theft, pilferage, quality & quantity losses, etc.
• Faster disposal of insurance claims
Member AFMA
CHALLENGES
• Timely accreditation of vast warehousing network

• Requirement of high quality manpower to roll out processes
and meet commitments
• Ensuring smooth periodic audits and implementation of
required Warehousing standards on pan India basis
• Creating scientific storage structures
• Developing standards/grade specifications for all
agricultural commodities
• Developing expertise in grading of commodities

Member AFMA

Recent Developments ON Warehouse Receipt System in India: Member AFMA

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Member AFMA

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

 EXISTING WAREHOUSE RECEIPT SYSTEM.

 THE WAREHOUSING (DEVELOPMENT AND

 ITS IMPACT ON AGRI BUSINESS.

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

NEED FOR DEVELOPMENT OF LICENSED

• 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 A WAREHOUSING SYSTEM IN PUBLIC SECTOR.

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

NEED FOR DEVELOPMENT OF LICENSED

• AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING)

• CENTRAL & STATE WAREHOUSING CORPORATIONS (CWC &

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

EXISTING WAREHOUSE RECEIPT SYSTEM

• WAREHOUSE RECEIPT - A RECEIPT IN THE PRESCRIBED FORM,

• THE LICENCED WAREHOUSEMAN IS AUTHORISED TO ISSUE A

• WAREHOUSE RECEIPT IS A DOCUMENT OF TITLE TO GOODS AS PER

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

EXISTING WAREHOUSE RECEIPT SYSTEM

• THE WAREHOUSING RECEIPTS AT PRESENT DO NOT ENJOY THE FIDUCIARY

• THE AVAILABLE LEGAL REMEDIES ARE ALSO TIME CONSUMING AND

• HENCE, THERE ARE IMPEDIMENTS IN THE NEGOTIABILITY OF WAREHOUSE

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

EXISTING WAREHOUSE RECEIPT SYSTEM

• THEREFORE, NEED WAS FELT TO ESTABLISH A NEGOTIABLE

• ON ONE HAND, IT WILL MAKE WAREHOUSE RECEIPTS A PRIME

• ON THE OTHER, IT WILL ALLOW BANKS TO IMPROVE QUALITY OF

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

OBJECTIVES & EXPECTED BENEFITS

 THE ACT INTENDS TO LAYDOWN REQUIREMENTS FOR

 THE MAIN OBJECTIVE OF THE ACT IS TO ENCOURAGE

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

OBJECTIVES & EXPECTED BENEFITS

 THE INTRODUCTION OF A NEGOTIABLE WAREHOUSE RECEIPT

 THOUGH, THE MINIMUM SUPPORT PRICE OPERATIONS TAKE

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

• SHORTER AND MORE EFFICIENT SUPPLY CHAINS.

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

1. EASY AVAILABILITY OF LOANS FROM BANKS.

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

THE WAREHOUSING (DEVELOPMENT & REGULATION)

• FORMAT OF WAREHOUSE RECEIPT

• CONDITIONS FOR NEGOTIABILITY OF WAREHOUSE RECEIPT BY DELIVERY

• ISSUE OF DUPLICATE WAREHOUSE RECEIPT.

• THE WAREHOUSING DEVELOPMENT AND REGULATORY AUTHORITY (WDRA)

• WAREHOUSING ADVISORY COMMITTEE

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

• SHALL BE A DOCUMENT OF TITLE TO GOODS IN WRITING IF IT CONTAINS ALL THE FOLLOWING

• WAREHOUSE RECIEPT(WR) NUMBER

• WAREHOUSE REGISRATION NUMBER & DATE OF VALIDITY

• NAME OF WAREHOUSE & POSTAL ADDRESS

• NAME & ADDRESS OF DEPOSITOR

• RATES OF STORAGE & HANDLING CHARGES

• DESCRIPTION OF GOODS, QUANTITY & QUALITY OR GRADE

• MARKET VALUE AT THE TIME OF DEPOSIT

GLOBAL MEET ON GREEN REVOLUTION II 08.02.2010

• NAME OF INSURANCE COMPANY

• WHETHER WR IS NEGOTIABLE OR NON NEGOTIABLE