Agri Business

Govt mulling 5% interest for loans against warehouse receipts

Vinson Kurian Thiruvananthapuram | Updated on February 03, 2011

Lowering costs: The Union Minister for State (Independent Charge) for Consumers Affairs, Food and Public Distribution, Prof K. V. Thomas, heading a conference of Food Ministers and Food Secretaries of South Indian States held in Thiruvananthapuram on Thursday. With him to the right are Mr C. Divakaran, Minister for Food, Kerala; Mr D. Sridhar Babu, Minister for Food,Andhra Pradesh; and Mr Rakesh Garg, Joint Secretary at the Department of Consumer Affairs, Food and Public Distribution. Photo: C. Ratheesh Kumar   -  THE HINDU

The Union Finance Ministry is examining a proposal for bringing down borrowing costs farmers against warehouse receipts from the current level of 11 per cent to five per cent.

This was disclosed to Business Line here by Prof K. V. Thomas, Union Minister (Independent Charge) for Consumer Affairs, Food, and Public Distribution.

The Minister said that the proposal is engaging the attention of the Union Finance Minister, Mr Pranab Mukherjee, with whom he has had a round of discussions.

ACHIEVING PARITY

Bringing the borrowing costs in this manner would help achieve parity with the rates currently applicable to conventional farm loan packages and remove a glaring dichotomy built therein, Prof Thomas said.

The warehouse receipts issued by registered entities become negotiable instruments against which banks can lend up to 70 per cent of the total value of goods.

Reforms are sought to be implemented through amendments in the Warehousing (Development & Regulation) Act, 2007.

According to market estimates, banks have an exposure of about Rs 15,000 crore against warehouse receipts currently.

A warehouse receipt is a written document given by a warehouseman for items received for storage in his or her warehouse, which serves as evidence of title to the stored goods. The general rule is that warehouse receipts need not be in any particular form. They must, however, contain information such as the location of the warehouse and the place where the goods are stored; the date when the receipt was issued; the consecutive number of the receipts; and terms indicating whether the goods are to be delivered to the bearer of the receipt, to a particular individual, or to a particular individual on his or her order. The receipts are also expected to contain storage rate or handling charges; a statement describing the goods or the manner in which they are packed; the signature of the warehouseman or his or her agent; the amount of advance payment made, if any; and any other terms that do not impair the warehouseman's duty.

In situations where a warehouse receipt does not contain these provisions, the warehouseman can be held liable in damages to anyone who sustains financial injury because of the omission.

Published on February 03, 2011

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