Indian needs better warehousing, higher agri productivity

The Warehouse Regulatory Authority Act will give a boost to the Indian commodity market as the country needs better warehousing facility and higher agriculture productivity, a senior Sebi official has said.      

"The approval of bill of Warehouse Regulatory Authority Act in Parliament to make warehouse receipts a negotiable instrument will set a new trend in Indian commodity sector," Securities and Exchange Board of India (SEBI) Joint Director Prabhakar Patil said on the sidelines of a conference 'Indian Structured Products Forum 2009' here.      

"Now we will have better and more modern infrastructure to preserve the quality of agri products," Patil said.      The Government is taking a little longer time to set up authority, because warehouse owners have to take responsibility for the quality of products that would be lying in their warehouses.      

Patil pointed out that there are concerns over the modern Agriculture Produce Marketing Committee (APMC) by-laws which are discussed for couple of years but have not gathered momentum because of various factors.      

India's cotton production is 565 kg per hectare as compared to 1,900 kg per hectare in Australia and around 1,000 kg per hectare of China."We need to increase our agriculture productivity which is very low as compared to some advanced countries," Patil said.      

The Indian commodities markets have made a rapid progress in the last six-years period and the trading volumes have touched Rs 52,48,956-crore in FY'09, which is more than 45 times growth in the last five years, he said.      

The growth is significant, especially considering number of participants in the markets today. The commodity derivatives market is very restricted because financial institutions and mutual funds are not permitted to participate in the market, Patil said.      

"In recent times, we have seen an exponential growth in commodity-linked assets, which are nothing but structural products," he said.      

Many NBFCs have set up commodity-linked structured products mainly in terms of debentures, he said.      

The investment in commodities derivatives have shot up from $13-billion in 2003 to $130-billion in 2008.