Godown rule to cover vegetables, fruit

Warehousing law amendment on cards to allow farmers use storage receipts as security for bank loans

Scenes of potato and tomato growers dumping their produce on the roads in some parts of the country recently, after prices fell sharply, may be less visible if the agriculture ministry succeeds in implementing a new idea.

To prevent distress sales, the ministry is working on a proposal to enable growers of perishable produce such as fruit and vegetables to get bank loans against commodities stored by them in designated warehouses and godowns.

To make this effective, perishable commodities would be brought under the ambit of negotiable warehouse receipts. At present, such negotiable receipts can be had only against non-perishable food items such as grain and cereal stored in warehouses and godowns accredited by the Warehousing Development and Regulatory Authority (WDRA). 

WARM COVER

* Warehouse law to also cover perishables such as fruit and vegetables

* Norms to be prepared for registration and accreditation of cold storage

* Farmers can store at the warehouses when prices fall and take bank loans against the storage receipts, which are also tradable

* Step to address the huge proportion of produce that is left to rot due to lack of storage

Negotiable warehouses receipts (NWRs) enable a grower to store produce in times of falling prices and get a bank loan on the receipt. Such a practice could be a boon for farmers when prices fall sharply.

Potato prices in Punjab and western Uttar Pradesh have dropped by a little more than half in the past year, largely because of a bumper harvest. Similarly, prices of onions have dropped sharply in major growing areas of Maharashtra and Karnataka.

“WDRA has been urged to start giving recognition to cold storage, so that negotiable receipts can be issued against the perishable commodities stored in these,” Agriculture Secretary P K Basu told Business Standard.

He said this would go a long way in preventing distress sales among fruit and vegetable farmers and promote steady growth of cold chains and modern storage facilities.

WDRA-recognised warehouses need to have modern facilities like pest control and fumigation, fire-fighting equipment, standardised construction and weighing equipment. The receipts issued by such recognised warehouses and cold storage are accepted by the government and banks can easily give loans on these.

“We are in the process of adding a new chapter in the WDRA Act that will facilitate registration and accreditation of temperature-controlled warehouses like cold storage and also types of commodities for which NWRs can be issued. There has to be due diligence before norms are finalised, as cold storage are different from simple warehouses,” said Dinesh Rai, chairman of WDRA.

Since October 2011 when WDRA was set up, around 3,000 NWRs have been issued by 300 accredited warehouses and godowns, against which Rs 25-30 crore of bank loan has been given to farmers.

The value of goods stored in such warehouses is around Rs 100 crore. Officials said that not all farmers who got negotiable receipts against their produce availed of bank loans, as they might not be in need of money or might have traded the NWR further.

Once WDRA starts granting recognition to cold storage, a standardised system for them could be developed, Basu said.

In India, there are just around 5,000 cold storage, catering to 233 million tonnes of horticulture items produced annually. Horticulture contributes 25-30 per cent to agricultural gross domestic product.