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Centre to amend Warehousing Act

GS Paper 3

Syllabus: Food processing and related industries in India – scope and significance, location, upstream and downstream requirements, supply chain management.

 

Source: The Hindu

Context: Union Food and Public Distribution Ministry have suggested major amendments to the Warehousing (Development and Regulation) Act of 2007.

Direction: Not a very important article from the perspective of the main but do remember 2-3 points. Moreover, more changes are likely in the future.

Aim of the amendment: Changes are aimed to help farmers get access to the service of quality warehouses

Definition: Warehouses are scientific storage structures especially constructed for the protection of the quantity and quality of stored products.

Provisions:

  • Make registration of godowns compulsory (At present, the registration with the Warehousing Development and Regulation Authority (WDRA) is optional)
    • Only the Central government will have powers to exempt any class of warehouses from registration with the Authority. This will ensure a gradual and non-disruptive change to a regulated warehousing system
    • Status: At present, there are about 60,000 warehouses in the country. Out of which, 4,700 warehouses have registered with the regulator but only 2,910 warehouses are active.
  • Raise the penalty for various offences: increase the penalty from the current ₹1 lakh for various offences
  • Will do away with the jail term as a punishment for the offences: The amendment will do away with up to three years imprisonment for various offences.
  • Exception for a captive warehouse: Captive warehouses such as those of the Food Corporation of India are excluded from the ambit of the Act.
  • Establish a system of negotiable and non-negotiable warehouse receipts (NWR) which is now in electronic form. It will enable NWR as a tool of the trade to improve the fiduciary trust of depositors and banks in the Negotiable Warehouse Receipt System.
  • Changes in WDRA: At present, the Authority is comprised of a chairperson and two full-time members. After the amendment, three ex-officio part-time members will be added to the Authority including joint secretaries in the Food and Economic Affairs departments and the Executive Director of the SEBI.
    • Enhanced power of WDRA: The powers to investigate, take enforcement action, impose a monetary penalty, recover monetary penalty and adjudication had been provided in the amendment.
  • Do away with the accreditation agencies: As the accreditation process was time-consuming, prone to malpractices and led to complaints.
    • The application for registration of warehouses will be submitted directly to the WDRA and a new system of online applications, which will be contactless and faceless will be implemented and the average registration time will be reduced.

 

Issues:

The Samyukt Kisan Morcha (SKM) (a farmer’s organization) fears that the amendments are for bringing back certain provisions of the repealed Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act through the backdoor.

 

Warehousing Development and Regulatory Authority (WDRA)

It was constituted in 2010 under the Warehousing (Development and Regulation) Act, 2007, under the Department of Food and Public Distribution to ensure scientific storage by prescribing infrastructural and procedural standards.

Negotiable Warehouse Receipt System

Launched in 2011, through it farmers can seek loans from banks against the warehouse receipts issued to them against their storage. The Electronic Negotiable Warehouse Receipt (e-NWR) System was launched in 2017.

Insta Links

Agriculture marketing and warehousing

 

Practice Questions

Consider the following statements regarding Warehouse Receipts.

  1. Warehouse Receipts are documents issued by warehouses to depositors against the commodities deposited in the warehouses.
  2. Warehouse Receipts issued by registered warehouses would help farmers to seek loans from banks against the receipts.

Which of the above statements is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. None

Answer: C

Warehouse Receipts are documents issued by warehouses to depositors against the commodities deposited in the warehouses, for which the warehouse is the bailee.

A warehouse Receipt is proof of storage. It is an acknowledgement of the goods held by the warehouse keeper on behalf of the person named therein. It is a document issued by a warehouse keeper stating that he holds the goods mentioned in the receipt and is awaiting instructions from the person to whom it is addressed. It is a mere deposit receipt. The banker can accept it as a security to grant loans.