Farmers, forced to sell their produce in panic for lack of storage space can now breathe a sigh of relief after the Warehousing (Development and Regulation) Act, 2007 has come into force with effect from October 25th, 2010.
The Central government has also decided to constitute Warehousing Development And Regulatory Authority (WDRA) under the act with effect from October 26th, 2010 with the publication of relevant notification in the official gazette.
The act was enacted by parliament in September, 2007.
Besides mandating the negotiability of warehouse receipt, it prescribes the form and manner of registration of warehouses and issue of negotiable warehouse receipts including electronic format and prescribes establishment of Warehousing Development and Regulatory Authority (WDRA), a regulatory body under the act. The authority shall consist of a chairperson and not more than 2 members.
The regulatory authority will register and accredit warehouses intending to issue negotiable warehouse receipts and put in place a system of quality certification and grading of commodities with a view to protecting the interests of holders of warehouse receipts against negligence, malpractices and fraud.
The introduction of negotiable warehouse receipt system in the country will not only help farmers avail better credit facilities and avoid distress sale, but will also safeguard financial institutions by mitigating risks inherent in credit extension to farmers. The pledging/collaterization of agricultural produce with a legal backing in the form of negotiable warehouse receipts will lead to increase in flow of credit to rural areas, reduce cost of credit and will spur related activities like standardization grading, packaging and insurance and development of chain of quality warehouses.