Warehouse receipt financing may touch Rs 1 lakh cr by 2020

This type of financing enables the farmer to get loans at low interest rates allowing him to avoid a distress sale at the time of harvest

The business of warehouse receipt financing, a tool to avail loans by storing crops in godown, will grow upto Rs 1 lakh crore in next five years given increasing awareness among farmers in this regard, said Origo Commodities India Private Ltd, a firm engaged in storing crops on behalf of government and private companies in 15 states.

“Warehouse receipt financing is now Rs 35,000 crore business, up from roughly Rs 5,000 crore a decade ago. With better policy execution and farmer awareness, it has the potential to grow upto Rs 1 lakh crore by 2020,” said Brij Raj Singh, chief executive officer of Origo Commodities.

Warehouse receipt financing is a tool for monetising farm produce without actually selling the commodity at the time of harvest. In this case, a farmer can obtain pledge financing from banks to the extent of 70-75 per cent of the value of the commodity after depositing his harvested crop at a warehouse close to his farm.

These type of financing enables the farmer to get loans at low interest rates allowing him to avoid a distress sale at the time of harvest.

Origo Commodities is a collateral management company, which allows farmers to make deposits of their produce in its warehouses and obtain pledge financing. It currently operates over 350 warehouses on lease basis and has over 3.5 million tonnes of commodities valued at around Rs 8,000 crore under management.

Apart from collateral management of agricultural commodities, its services include procurement for farmers, producers, processors, corporate houses and on behalf of Food Corporation of India (FCI) as well. It has plans to provide all services required in post harvest management of crops.

“We will consolidate all processes of post harvest management, starting from procurement, scientific storage to delivery to the end user,” said Mayank Dhanuka, director of Origo.

The firm recently won contract to store 120,000 tonne rice and wheat in Odisha on behalf of Odisha State Warehousing Corporation. It has entered into similar arrangements with government agencies in other states such as Rajasthan, Punjab, Maharashtra, Madhya Pradesh for storage of different commodities.

Apart from government contracts, it also procures and stores raw material for corporates such as ITC, Cargill, Glencore, etc.

“In future we believe, earnings from government contracts, private procurement and collateral management services will drive our revenue,” said Dhanuka.