The Hindu Business Line : Bill to make warehouse receipts negotiable soon

WAREHOUSE receipts may soon become negotiable instruments, with the Government on Friday stating that it would introduce the Warehousing (Development and Regulation) Bill 2005 in the forthcoming session of Parliament.

The Union Cabinet has already approved the introduction of Bill on Development and Regulation of Warehouses issuing negotiable warehouse receipts, said an official release.

The system of negotiable warehouse receipt with legislative back-up would result in increase in liquidity in the rural areas, encourage scientific warehousing of goods, lower cost of financing, enhanced rewards for grading and quality of agricultural produce and better price risk management.

At present, the receipts issued by warehouses do not enjoy the trust of depositors and banks, as there is a fear that banks would not be able to recover the loans in the events, such as fraud or mismanagement on behalf of the warehouse or the insolvency of the depositor.

The legal remedies are also time-consuming and inadequate.

Warehouse receipts state that the goods are placed in the warehouse. Even if the banks wish to finance against warehouse receipts to the farmers/depositors, they are either limited to those farmers and operators whom they trust or they have to incur high costs in screening out suitable farmers and warehouse operators.

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