Smallholder farmers across India are facing agrarian distress because the combination of prices below breakeven, limited financial fallback, and negligible bargaining power forces them to sell under duress. Though warehouses exist, the problem is making them easily accessible to farmers so that they can benefit. Having reliable registered warehouses nearby where the farmers could store their produce could end their misery. The farmers could use the negotiable warehouse receipts issued by the warehouse to raise credit while waiting for prices to turn attractive, and then simply sell the receipt in their marketplace of choice without getting concerned about logistics.
While the receipts issued by unregistered warehouses are only an acknowledgement, those issued by registered warehouses show title/ownership and are tradable.
Public warehouses serve as the backbone of our rural economy, functioning as the nodal point for converting crops into a dematerialised and liquid financial asset for maximising returns and handling risk. Consumers need affordable and quality food supply, especially in fruit and vegetables that are cultivated by small and marginal farmers who would benefit much from storing their produce in a nearby warehouse.
Agri-business needs predictable raw material supply. At present, agricultural warehousing is an unorganised, fragmented, but rapidly evolving market, its components already assembled and ready. Registration of warehouses can steer the business within a short span of time.
The Warehousing Development and Regulatory Authority (WDRA) has the framework, guidelines, and powers to register and regulate warehouses that can issue negotiable warehouse receipts in electronic and paper format. Banks willingly lend against such receipts. Repositories are ready to record transactions and transfer of titles as produce changes hands. However, nothing has been done in this regard.
What Can be Done?
- Warehouses owned by Primary Agricultural Cooperative Societies (PACS) should be enabled to issue negotiable warehouse receipts. This can be done by getting the Registrar of Cooperative Societies in each state to pass on the list of eligible warehouses to the WDRA for registration. These warehouses receive credit from the National Bank for Agriculture and Rural Development (Nabard) and undertake procurement on behalf of the government. In Bihar, there are 8,400 PACS. Tamil Nadu has got 300 PACS warehouses registered, and another 1,200 are likely to follow.
- The 16 states that have a presence in the electronic National Agricultural Market (eNAM) network could agree that all warehouses registered with WDRA would automatically get the status of mandis for warehouse-based sales.
- The process can be simplified if states can recognise WDRA registration under their own warehouse licensing laws. Not only would this bring down compliance costs for warehouse owners but it would eliminate duplication of work as well. The cooperative and private sectors together own 45 per cent of India’s agricultural warehousing capacity of 158.52 million tonnes.
- Banks must lend only against produce kept in WDRA-registered warehouses so that there is adequate protection for smallholder farmers and recourse for redressal. Banks lend more than ` 40,000 crore annually against pledged crops through tie-ups with private collateral managers. Only a fraction of this portfolio is against negotiable warehouse receipts.
- Warehouses constructed with government subsidy and Nabard schemes must automatically be registered with WDRA so that they can be useful to smallholder farmers in providing market-related services. Warehouses must be registered under the new Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017. Easier laws need to be put in place to encourage warehouse owners to bring the marketplace closer to smallholder farmers and farmer producer organisations (FPOs).