Warehouses may harvest Rs 1 lakh cr

BANGALORE: Get prepared for the way agri-financing will happen in India in the coming years. With the Lok Sabha having given its nod for the Warehouse Regulation & Development Bill, experts believe that financing against warehousing receipts is all set to balloon.

Estimates indicate a potential of as much as Rs 75,000 crore to Rs 1 lakh crore over the next four to five years. Agriculture, despite India’s pro-service sector tilt, continues to be the mainstay as it employs close to 70% of the Indian population.

“Currently close to 96% to 97% of a bank’s funding is in agriculture operations. There is nothing substantial happening at the post-harvest stage, something which is bound to change in the days ahead thanks to the new development,” says Mr P H Ravikumar, MD & CEO of NCDEX.

Hesitancy on the part of the banks is understandable given that though theoritically warehouse receipts are akin to negotiable instruments, they had not got the sanction. The key point is that once treated as a negotiable instrument, a warehouse receipt can protect a lender (banker)’s interest. Under normal circumstances, a banker (is not liable to the drawer) if he were to accept a negotiable instrument in good faith despite the title of such an instrument being defective.

It is not just that the bankers would benefit. National Bulk Handling Corporation MD & CEO Anil K Choudhary, says that with regulations being put in place, the incidence of fraud in warehousing is also bound to come down. Frauds like release of goods under lien without securing the approval of the bank, misdeclaring of quantity and quality of the produce stored is quite commonplace.

The approval for the Warehouse Regulation & Development Bill comes at a time when commodities futures trading has been on the rise. Futures trading was estimated to be about Rs 30 lakh crore in FY ‘07 and the opinion is that this number is bound to grow in the years to come. In FY ‘01 this market was estimated to be around Rs one lakh crore.