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WAREHOUSING & WAREHOUSE RECEIPTS IN COMMODITY FUTURES MARKETING

WAREHOUSING & WAREHOUSE RECEIPTS IN COMMODITY FUTURES MARKETING. N. K. CHOUBEY. NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING. WIDESPREAD RURAL INDEBTEDNESS OF FARMING COMMUNITY. ROYAL COMMISSION ON AGRICULTURE, 1928 RECOMMENDED ESTABLISHMENT OF LICENSED WAREHOUSES.

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WAREHOUSING & WAREHOUSE RECEIPTS IN COMMODITY FUTURES MARKETING

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  1. WAREHOUSING & WAREHOUSE RECEIPTS IN COMMODITY FUTURES MARKETING N. K. CHOUBEY

  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.

  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SECTOR WAS INEVITABLE • AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING CORPORATION) ACT, 1956 WAS PASSED AND LATER ON REPEALED AND REPLACED BY WAREHOUSING COPORATION ACT, 1962 FOR CREATION OF WAREHOUSING.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 01-07-2005) DISCRIPTION CWC SWC TOTAL TOTAL NO. OF 498 1599 2097 WAREHOUSE CAPACITY 10.42 14.55 24.97 CAPACITY 10.42 14.55 24.97 1MT=6Sq.FT

  7. SERVICES OFFERED BY CWC • SCIENTIFIC STORAGE FACILITIES FOR MORE THAN 400 COMMODITIES. • MARKETING FACILITIES (HANDLING & TRANSPORTATION THROUGH OUTSOURCING) • CUSTOM BONDED WAREHOUSES. • CONTAINER FREIGHT STATIONS AND INLAND CLEARENCE DEPOTS. • AIR CARGO COMPLEXES. • PEST CONTROL SERVICES.

  8. WHAT IS WAREHOUSE RECEIPT(WR) AS PER STATE WAREHOUSES ACT, WR MEANS A “RECEIPT” IN THE PRESCRIBED FORM ISSUED BY A LICENCED WAREHOUSE MAN TO A PERSON DEPOSITING GOODS IN THE WAREHOUSE

  9. 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.

  10. SOUND & RELIANCE WAREHOUSE RECEIPT SYSTEM • WAREHOUSE RECEIPT SYSTEM CAN PLAY SIGNIFICANT ROLE IN REDUCING THE PRESSURE ON THE GOVT. TO CARRY LARGE INVENTORY OF THE AGRICULTURAL PRODUCE.

  11. WAREHOUSEMAN’S 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.

  12. WORKING OF WAREHOUSE RECEIPT SYSTEM WAREHOUSE RECEIPT INSPECTION GRADING INSURANCE PLEDGING WAREHOUSE BANKING/FINANCIAL INSTITUTION PRODUCER EXPORTERPROCESSOR

  13. 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./--

  14. WR IS A DOCUMENT OF TITLE TO GOODS AS PER THE SALE OF GOODS ACT, 1930. • THE GOODS COVERED BY A NEGOTIABLE WAREHOUSE RECEIPT CAN BE TRANSFERRED BY ENDORSEMENT ON THE WR AND ITS DELIVERY TO THE ENDORSEE. • 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./--

  15. 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.

  16. WAREHOUSING COMPANIES AS INDEPENDENT AGENTS • THE LEGISLATIONS PROVIDE THAT NO WAREHOUSING ENTITY WILL TRADE IN GOODS TO AVOID CONFLICT OF INTEREST. • THE STATE WAREHOUSE ACTS ALSO PROVIDE LICENSING OF SAMPLERS, GRADERS AND WEIGHERS. • IN PRESENT TIMES THE WAREHOUSING ENTITIES NEED TO BE ADEQUATELY CAPITALISED AND PROFESSIONALLY MANAGED.

  17. 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.

  18. 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.

  19. 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.

  20. 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 ?

  21. TRADE IN PHYSICAL SAMPLES ISSUE OF GRADING CERTIFICATE (GC) ACCREDIT INDEPENDENT & CREDIBLE WAREHOUSES FOR ISSUE OF GC AND WR TRADE ON WR

  22. 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 .

  23. REQUIREMENT FOR TRADE IN WR • RELIABLE AND REPUTABLE WAREHOUSE OPERATORS WITH GOVT. REGULATION. • APPROPRIATE WAREHOUSING AND COMMERCIAL LEGISLATION FOR WAREHOUSE WARRANTS AND DEMAT.

  24. 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 IS LIKELY, WHICH WILL ENHANCE THE COMPETIVENESS OF INDIAN AGRICULTURE IN THE DOMESTIC AS WELL AS GLOBAL MARKET.

  25. STRATEGIES TO BE ADOPTED BY WAREHOUSING CORPORATIONS : • NEED TO ADOPT MARKET -ORIENTED POLICIES • TO WIN THE CONFIDENCE OF CUSTOMERS. • EXPLORE NEW AVENUES WHILE CONTINUING TO PURSUE THE BASIC OBJECTIVES OF PROVIDING SUPPORT TO AGRICULTURAL SECTOR AND TRANSLATE NEW EMERGING OPPORTUNITIES INTO COMMERCIAL REALITIES.

  26. THANK YOU

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