Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Address on

Prospects of Infrastructural financing in Warehousing

At

ASSOCHAM House, 47, Prithviraj Road, Opposite Safdarjung Tomb, New Delhi,
INDIA
[November 15th, 2010 from 9.30 AM - 1.30 PM]

by

Saurabh Agarwal
Vice-Chairman, Indian Institute of Finance, Delhi, INDIA

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Acknowledgements
The author gratefully acknowledge the technical support of Indian
Institute of Finance and Faculty of Management Studies (DU). We
would specially like to thank Prof. J. D. Agarwal (IIF), Prof. Manju
Agarwal (DU) and Prof. Madhu Vij (FMS) who have inspired me in
many ways to work on this complex issue.

We would also like to convey our thanks to Prof. Aman Agarwal (IIF),
Prof. Yamini Agarwal (IIF) and Prof. Megha Agarwal (DU) for giving
me their suggestions and comments.

The views and reviews presented in the presentation are views and opinions of the
author, based on his research and do not depict institutional or countries views or
of the institutions the author is associated with. All errors and omissions are my
own.

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Focus

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Overview
Warehousing Development and Regulatory Authority (notified
October 2010)
Warehousing (Development and Regulation) Act, 2007
Effects of the Act and Authority
Few takers for Centre’s Subsidized Food grain release
Supreme Court Remark “Give it free instead of wasting it”
Recommendation of Smt. Sonia Gandhi headed National
Advisory Council for providing subsidised food grains to
everyone in 150 poorest districts of India
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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Glorious Indus Valley Civilization

Agricultural economy and surplus production
Mohenjodaro
Great Granary of Mohenjodaro consisted of twenty seven
blocks of brickwork criss crossed by ventilation channels
Presence of loading bays from which the grains were raised
in the storage .

Harappa
Harappa has two rows of six granaries. The total area was
about 800 sq. m.
Area for threshing grains
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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Foodgrains
235.13 (in lakh MT) of foodgrains with FCI (10/2010)
Storage
Better warehousing will enable better management of
Inflation

Political will for promoting warehousing infrastructure

Liberalised Scheme for hiring of warehouses (2010)
GOI unique Private Entrepreneur Guarantee Scheme (2010)
Guaranteed hiring of godowns
Income Tax Benefit u/s 35 AD

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Storage
FIFO Technology to be part of the Warehousing Policy
System of Containers marked with date of storage to
enable quick transportation and disaster management
In- Out Method of Storage

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Y shaped Storage of
Food grains

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

How to Manage Warehouses

Adoption of EOQ Method to manage foodgrains

Quantity Maximum

Average

Minimum

Danger Zone

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Micro Economic Perspective

Warehouse Receipt Financing – Agricultural and Non
Agricultural Commodities
The negotiability of warehouse receipt
Registration and accreditation of warehouses intending to
issue negotiable warehouse receipts
System of quality certification and grading of commodities
How will the farmers and Financial Institutions Benefit
Postponement of sales beyond the harvest season
WRs are secure collateral for obtaining finance
“price takers” to that of “price negotiators”
10 Is There a Downside for the Farmer?
 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Horticulture – Opportunities for PPP

National Horticulture Mission (NHM) was launched in 2005-

06 for Fruits and Vegetables.
Results in 2010
Under the post harvest management component, 898 pack
houses, 46 cold storages, 14 refrigerated vans, 7 wholesale
markets and 45 rural markets have been set up

Requirement of adopting warehousing

Technology as adopted by Walmart etc.

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Data Warehousing & Electronics and

information technology
To provide information of

Accredited Warehouses
Availability of Warehouses
On time, On budget, Right Functionality
Serve Commodities Future Market and Spot Exchanges

The nationwide grid-computing initiative, Garuda, aggregates

supercomputing and storage resources nationwide, provides a
problem-solving environment, and enables collaborative R&D
for research and user community. Garuda connects 45 premier
institutions across17 cities.
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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Ports Warehousing – Investment Opportunities

Ports

Areas have been opened up to the private sector on BOT

basis
Areas opened up include construction of cargo-handling
berths and dry docks, container terminals and warehousing
facilities and ship-repair facilities.

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Decentralized Procurement Scheme (DCP)

 Introduced in 1997, under which food grains are procured and
distributed by the State Governments themselves
Advantages
 Wider coverage of farmers
 Higher Efficiency in the form of saved transportation and
reduced pilferage.
 Is successful for rice but not for wheat.
Questions
How can this be made efficient?
How can it be extended to other agricultural commodities and
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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Financing
A. Domestic Financial Markets:
i. Equity finance
ii. Debt Finance
iii. Domestic Capital Market
iv. Financial Developmental Institutions
B. International Financial Markets:
i. Multilateral Institutions
ii. Export Credit Agencies (ECA)
iii. External Commercial Borrowing (ECB)
iv. Syndicated Loans
v. Private placement
vi. Global Depository Receipts (GDRs)
15 vii. Weather Derivatives & Hybrid Instruments
 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Financing
C. Internal Resources

D. Public Private Partnership

E. Forward Need Financing

This will prevent cost of capital being added to cost of

foodgrains

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 Saurabh Agarwal, Prospects of Infrastructural financing in Warehousing

Thank You
for
your Patience

If you have any unanswered Questions . You can reach me at

sa@financeindia.org

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