warehousing & warehouse receipts in commodity futures marketing

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WAREHOUSING & WAREHOUSE RECEIPTS IN COMMODITY FUTURES MARKETING. N. K. CHOUBEY. NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING. WIDESPREAD RURAL INDEBTEDNESS OF FARMING COMMUNITY. ROYAL COMMISSION ON AGRICULTURE, 1928 RECOMMENDED ESTABLISHMENT OF LICENSED WAREHOUSES. - PowerPoint PPT Presentation

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Page 1: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING
Page 2: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

• WIDESPREAD RURAL INDEBTEDNESS OF

FARMING COMMUNITY.

• ROYAL COMMISSION ON AGRICULTURE, 1928

RECOMMENDED ESTABLISHMENT OF LICENSED

WAREHOUSES.

• ALL INDIA RURAL CREDIT SURVEY COMMITTEE,

1954 REITERATED THE NEED FOR

WAREHOUSING IN PUBLIC SECTOR.

NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING

Page 3: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

• AS WAREHOUSING NEEDS HUGE CAPITAL INVESTMENT WITH LOW RETURNS PUBLIC SECTOR WAS INEVITABLE

• AGRICULTURAL PRODUCE (DEVELOPMENT & WAREHOUSING CORPORATION) ACT, 1956 WAS PASSED AND LATER ON REPEALED AND REPLACED BY WAREHOUSING COPORATION ACT, 1962 FOR CREATION OF WAREHOUSING.

• CENTRAL & STATE WAREHOUSING CORPORATIONS (CWC & SWCs) WERE ESTABLISHED UNDER THIS ACT.

NEED FOR DEVELOPMENT OF LICENSED WAREHOUSING

Page 4: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

• THE STATES ENACTED UNIFORM WAREHOUSE

ACTS & RULES DURING 1956 – 1960 FOR

SUPERVISION AND REGULATION OF

WAREHOUSING OPERATIONS.

• IT PROVIDES FOR SOUND AND RELIABLE

WAREHOUSE RECEIPT SYSTEM AT PAR WITH

DEVELOPED ECONOMIES.

LICENSING OF WAREHOUSES FOR SOUND WAREHOUSE RECEIPT SYSTEM

Page 5: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

AN ECONOMIC ACTIVITY

CONCOMITANT TO AGRICULTURE

CLOSELY LINKED WITH AGRO

INDUSTRIAL DEVELOPMENT & TRADE

WAREHOUSING

Page 6: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSING INFRASTRUCTURE(CAPACITY IN MILLION TONNNES A ON 01-07-2005)

DISCRIPTION CWC SWC TOTAL

TOTAL NO. OF 498 1599 2097WAREHOUSE

CAPACITY 10.42 14.55 24.97

CAPACITY 10.42 14.55 24.971MT=6Sq.FT

Page 7: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

• SCIENTIFIC STORAGE FACILITIES FOR MORE THAN 400 COMMODITIES.

• MARKETING FACILITIES (HANDLING & TRANSPORTATION THROUGH OUTSOURCING)

• CUSTOM BONDED WAREHOUSES.

• CONTAINER FREIGHT STATIONS AND INLAND CLEARENCE DEPOTS.

• AIR CARGO COMPLEXES.

• PEST CONTROL SERVICES.

SERVICES OFFERED BY CWC

Page 8: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WHAT IS WAREHOUSE RECEIPT(WR)

AS PER STATE WAREHOUSES ACT, WR

MEANS A “RECEIPT” IN THE PRESCRIBED

FORM ISSUED BY A LICENCED WAREHOUSE

MAN TO A PERSON DEPOSITING GOODS IN

THE WAREHOUSE

Page 9: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSE RECEIPTS A TOOL FOR :

SOFTENING THE RIGIDITY INVOLVED IN HANDLING COMMODITIES

BETTER CREDIT DELIVERY.

BETTER LOAN RECOVERY FOR FINANCIAL INSTITUTIONS.

CONVENIENCE IN ASSET MANAGEMENT.

MARKET INSTRUMENT FOR DEVELOPING INDIAN ECONOMY.

Page 10: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSE RECEIPT SYSTEM CAN

PLAY SIGNIFICANT ROLE IN

REDUCING THE PRESSURE ON THE

GOVT. TO CARRY LARGE INVENTORY

OF THE AGRICULTURAL PRODUCE.

SOUND & RELIANCE WAREHOUSE RECEIPT SYSTEM

Page 11: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSEMAN’S LIABILITY

IT IS THE LIABILITY OF THE WAREHOUSEMAN

TO RETURN ON DEMAND OR SURRENDER OF

THE WR, THE GOODS OF THE SAME QUALITY

AND QUANTITY (SUBJECT TO NATURAL LOSS

DURING STORAGE DUE TO SHRINKAGE ETC.)

WHICH WERE TENDERED FOR STORAGE BY

THE DEPOSITOR.

Page 12: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WORKING OF WAREHOUSE RECEIPT SYSTEM

WAREHOUSE

WAREHOUSERECEIPT

PLEDGING

BANKING/FINANCIAL INSTITUTION

INSPECTIONGRADING

INSURANCE

PRODUCEREXPORTER

PROCESSOR

Page 13: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

TRANSFERABILITY OF WAREHOUSE RECEIPT

STATE WAREHOUSE ACTS PROVIDE “NEGOTIABLE / NON-NEGOTIABLE” IN THE PRESCRIBED FORM OF WAREHOUSE RECEIPT.

THE STATE WAREHOUSES ACTS ALSO PROVIDE THAT UNLESS OTHERWISE SPECIFIED IN THE WR, A RECEIPT ISSUED BY WH MAN IS TRANSFERABLE BY ENDORSEMENT AND SHALL MAKE ITS LAWFUL HOLDER TO RECEIVE THE GOODS SPECIFIED IN IT, ON THE SAME TERMS AND CONDITIONS, ON WHICH THE PERSON WHO ORIGINALLY DEPOSITED THE GOODS, WOULD HAVE BEEN ENTITLED TO RECEIVE THEM.

CONTD./--

Page 14: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WR IS A DOCUMENT OF TITLE TO GOODS AS PER THE SALE OF GOODS ACT, 1930.

THE GOODS COVERED BY A NEGOTIABLE WAREHOUSE RECEIPT CAN BE TRANSFERRED BY ENDORSEMENT ON THE WR AND ITS DELIVERY TO THE ENDORSEE.

A PERSON TO WHOM WAREHOUSE RECEIPT IS NEGOTIATED, ACQUIRES A TITLE TO THE WAREHOUSE RECEIPT, THE RIGHT OF POSSESSION OF THE GOODS COVERED BY THE WAREHOUSE RECEIPT AND THE RIGHT TO REQUIRE THE WAREHOUSE MAN TO HOLD OR DELIVER THE GOODS ACCORDING TO THE TERMS OF WAREHOUSE RECEIPT.

CONTD./--

Page 15: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

HENCE, THE WR ENJOYS THE ADVANTAGE OF NEGOTIABLE INSTRUMENT.

BUT AS PER NEGOTIABLE INSTRUMENT ACT, 1881, WAREHOUSE RECEIPT IS NOT A NEGOTIABLE INSTRUMENT.

WHEREAS RAILWAY RECEIPT, LORRY RECEIPT, BILL OF LADING THOUGH NEGOTIABLE BY ENDORSEMENT ARE ALSO NOT NEGOTIABLE INSTRUMENTS AS PER N.I.ACT, 1881.

ALL THESE INSTRUMENTS ARE ACCEPTED BY COMMERCIAL BANKS AS COLLARAL / SECURITY AGAINST GOODS COVERED BY THEM.

Page 16: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSING COMPANIES AS INDEPENDENT AGENTS

THE LEGISLATIONS PROVIDE THAT NO WAREHOUSING ENTITY WILL TRADE IN GOODS TO AVOID CONFLICT OF INTEREST.

THE STATE WAREHOUSE ACTS ALSO PROVIDE LICENSING OF SAMPLERS, GRADERS AND WEIGHERS.

IN PRESENT TIMES THE WAREHOUSING ENTITIES NEED TO BE ADEQUATELY CAPITALISED AND PROFESSIONALLY MANAGED.

Page 17: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSING COMPANIES AS INDEPENDENT AGENTS

EVERY WAREHOUSEMAN RESPONSIBLE FOR ALL NECESSARY PRECAUTIONS FOR SCIENTIFIC STORAGE.

EVERY WAREHOUSEMAN RESPONSIBLE TO TAKE INSURANCE OF THE GOODS STORED WITH HIM.

WAREHOUSEMAN CAN NOT LEND MONEY AGAINST GOODS IN WAREHOUSE.

Page 18: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

WAREHOUSING COMPANIES AS INDEPENDENT AGENTS

THE INSPECTION, SAMPLING, WEIGHMENT AND GRADING BY A LICENCED WAREHOUSING COMPANY ARE MORE DEPENDABLE THAN COLLATERAL MANAGERS AS OUTSIDERS.

THE NEXT GENERATION IN WAREHOUSE RECEIPTS TO BE THE WAREHOUSE WARRANTS WHICH CAN BE MORE SOFTLY TRADED THAN NEGOTIABLE WAREHOUSE RECEIPTS.

THE GENERAL CONDITIONS FOR OPERATION OF WAREHOUSE WARRANTS CAN BRING VALUE ADDITION IN WAREHOUSING ACTIVITY.

Page 19: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

ADVANTAGES OF WAREHOUSE RECEIPT SYSTEM

PROVIDES FINANCIAL FLEXIBILITY TO

FARMERS/ PROCESSORS /TRADERS.

SAVES FARMERS FROM DISTRESS SALES

DURING CROP SEASON.

ENHANCES VOLUME OF BUSINESS AND

PRODUCTIVITY.

REDUCES SEASONAL PRICE VARIATIONS.

IMPROVES EFFICIENCY OF MARKETING

SYSTEM.

Page 20: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

NEGOTIABILITY OF THE WAREHOUSE

RECEIPTS IS TO BE USED FOR TRADING, OR

ACCEPTED FOR DELIVERY AGAINST A

DERIVATIVE INSTRUMENT SUCH AS FUTURE

CONTRACT.

COMMODITY EXCHANGES NEED TO BE

DEVELOPED AS THE MARKET PLACE FOR

TRADE IN WAREHOUSE RECEIPT.

HOW ?

Page 21: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

TRADE IN PHYSICAL SAMPLES

ISSUE OF GRADING CERTIFICATE (GC)

ACCREDIT INDEPENDENT & CREDIBLE WAREHOUSES FOR ISSUE OF GC AND WR

TRADE ON WR

Page 22: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

OBSTACLES IN USAGES OF W.R. IN INDIA

LACK OF AWARENESS AND TRAINING.

INAPPROPRIATE TRADING PRACTICES.

LACK OF APPROPRIATE LEGAL, REGULATORY AND INSTITUTIONAL ENVIRONMENT TO SUPPORT WR.

LIMITED FAMILIARITY OF BANKING COMMUNITY WITH WAREHOUSE RECEIPT .

Page 23: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

REQUIREMENT FOR TRADE IN WR

RELIABLE AND REPUTABLE WAREHOUSE

OPERATORS WITH GOVT. REGULATION.

APPROPRIATE WAREHOUSING AND

COMMERCIAL LEGISLATION FOR

WAREHOUSE WARRANTS AND DEMAT.

Page 24: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

FUTURE LEGISLATION

• NEGOTIABLE WAREHOUSE RECEIPTS BILL AS A

PART OF REFORMS IN THE FIELD OF

AGRICULTURAL MARKETING IS UNDER ACTIVE

CONSIDERATION OF GOVT. OF INDIA.

• NEW LEGISLATION TO THIS EFFECT IS LIKELY,

WHICH WILL ENHANCE THE COMPETIVENESS

OF INDIAN AGRICULTURE IN THE DOMESTIC AS

WELL AS GLOBAL MARKET.

Page 25: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING

• NEED TO ADOPT MARKET -ORIENTED POLICIES

• TO WIN THE CONFIDENCE OF CUSTOMERS.

• EXPLORE NEW AVENUES WHILE CONTINUING

TO PURSUE THE BASIC OBJECTIVES OF

PROVIDING SUPPORT TO AGRICULTURAL

SECTOR AND TRANSLATE NEW EMERGING

OPPORTUNITIES INTO COMMERCIAL REALITIES.

STRATEGIES TO BE ADOPTED BY WAREHOUSING CORPORATIONS :

Page 26: WAREHOUSING  & WAREHOUSE RECEIPTS    IN  COMMODITY FUTURES MARKETING