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B.B.PATTANAIK MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION NEW DELHI

RECENT DEVELOPMENTS ON WAREHOUSE RECEIPT SYSTEM IN INDIA. B.B.PATTANAIK MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION NEW DELHI. PRESENTATION STRUCTURE . HISTORICAL BACKGROUND. EXISTING WAREHOUSE RECEIPT SYSTEM.

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B.B.PATTANAIK MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION NEW DELHI

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  1. RECENT DEVELOPMENTS ON WAREHOUSE RECEIPT SYSTEM IN INDIA B.B.PATTANAIK MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION NEW DELHI

  2. PRESENTATION STRUCTURE • HISTORICAL BACKGROUND. • EXISTING WAREHOUSE RECEIPT SYSTEM. • THE WAREHOUSING (DEVELOPMENT AND REGULATION), ACT 2007. • ITS IMPACT ON AGRI BUSINESS.

  3. 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.

  4. 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AND HENCE PUBLIC SECTOR WAS INEVITABLE AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING) ACT, 1956 WAS ENACTED, LATER REPEALED AND REPLACED BY WAREHOUSING COPORATIONS ACT, 1962.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.

  5. 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 LICENCEDWAREHOUSEMAN 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.

  6. 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. EXISTING WAREHOUSE RECEIPT SYSTEM

  7. 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. EXISTING WAREHOUSE RECEIPT SYSTEM

  8. 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.

  9. 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.

  10. 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

  11. BENEFITS TO FARMERS • EASY AVAILABILITY OF LOANS FROM BANKS. • REAL & EFFECTIVE RECOURSE & INSTRUMENT TO AVOID DISTRESS SALE. • PROPER GRADING OF THE STOCKS RESULTING IN BETTER UNDERSTANDING & INCREASED REALIZATION OF THE VALUE. • INCREASED CONFIDENCE DUE TO WELL LAID ACCOUNTABILITY & PENALTY CLAUSES FOR ALL SERVICE PROVIDERS. • QUICK & EFFECTIVE LOSS COMPENSATION & DISPUTE SETTLEMENTS

  12. 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

  13. 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 WAREHOUSE RECIEPT Cont…

  14. 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 WAREHOUSE RECIEPT

  15. 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.

  16. WAREHOUSE RECEIPT SYSTEM WAREHOUSE RECEIPT INSPECTION GRADING INSURANCE PLEDGING WAREHOUSE BANKING/FINANCIAL INSTITUTION FARMER EXPORTERPROCESSOR

  17. 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

  18. 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

  19. 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.

  20. OPPORTUNITY – AGRI BUSINESS • 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

  21. OPPORTUNITY – AGRI BUSINESS • 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

  22. 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

  23. THANK YOU

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