Centre To Amend Warehousing Act
GS 2,3; Govt Policies and Interventions, Infrastructure, Growth and Development.
Context:
The Union Food and Public Distribution Ministry has proposed significant changes to the 2007 Warehousing (Development and Regulation) Act.
Warehousing (Development and Regulation) Act Of 2007:
- The Warehousing (Development and Regulation) Act, 2007, went into effect on October 25, 2010, to assure scientific storage by establishing infrastructure and procedural requirements. The Act does not apply to captive warehouses such as the FCI.
- The Act intends to create a system of negotiable and non-negotiable warehouse receipts (NWR), which are currently available in electronic form.
- It is a statutory authority of the Government of India’s Department of Food and Public Distribution.
- Its headquarters are in New Delhi.
- The Act establishes the WDRA to exercise the powers granted to it and perform the functions assigned to it under the Act, Rules and Regulations for the development and regulation of warehouses, negotiability of warehouse receipts, and to promote the orderly growth of the country’s warehousing business.
- Under the Warehousing Act of 2007, the Indian government also chose to establish a regulating organisation, the Warehousing Development and Regulatory Authority (WDRA).
- The Act does not apply to captive warehouses such as the FCI.
Composition of the Authority:
The Authority will be made up of the following individuals:
- a chairman; and
- no more than two more members.
The Central Government will appoint from among people of talent, honesty, and status who have extensive knowledge and expertise in inventory management, insurance, preservation, quality control, agriculture banking, finance, economics, law, or administration.
Powers And Functions of The Authority:
The Authority shall have the obligation, subject to the terms of this Act and any other legislation in effect at the time, to regulate and assure the execution of the provisions of this Act and to encourage the orderly expansion of the warehousing industry.
The Authority’s powers and functions must include the following: —
- To provide a certificate of registration in relation of warehouses to applicants who meet the conditions for warehousemen, or to renew, alter, withdraw, suspend, or revoke such registration;
- To govern the registration and operation of accreditation agencies, to renew, modify, withdraw, suspend, or revoke such registration, and to prescribe the code of conduct for accreditation agency officials for warehouse accreditation;
- To define the qualifications, code of conduct, and practical training for warehousemen and other warehousing personnel;
- To govern the process of pledge, charge generation, and enforcement in relation to commodities placed with the warehouse;
- To increase efficiency in warehouse operations;
- To enact rules establishing requirements for the accreditation of certifying organisations for the grading of products;
- To encourage professional organisations related to the warehousing industry;
- To set the fee and other charges for carrying out the provisions of this Act and to levy them;
- Requesting information from, inspecting, conducting inquiries and investigations, including audits of warehouses, accrediting agencies, and other organisations involved in the warehousing sector;
- To control the prices, benefits, terms, and conditions that warehousemen may provide in relation to warehousing activity;
- To establish by regulations the form and method in which warehousemen must keep books of account and submit statements of accounts;
- To keep an arbitration panel on hand and to appoint arbitrators from such panel in disputes between warehouses and warehouse receipt holders;
- To govern and build an electronic system for keeping and transferring credit balances on fungible products held in warehouses;
- Determining the minimum proportion of space to be maintained aside in a registered warehouse for the storage of agricultural goods;
- To define the warehouseman’s tasks and obligations;
- To exercise any further powers and undertake any additional tasks that may be specified.
Central Government’s Authority to Give Directives:
- The Authority shall be bound by such directions on policy questions, other than those relating to technical and administrative matters, as the Central Government may give in writing to it from time to time: provided, however, that the Authority shall be given an opportunity to express its views before any direction is given.
- The Central Government’s decision, whether on a policy point or not, is definitive. Central Government’s Authority to Supersede Authority: If, at any point, the Central Government believes—
- That the Authority is unable to exercise the responsibilities or perform the obligations imposed on it by or under the provisions of this Act due to circumstances beyond its control; or
- That the Authority has persistently failed to comply with any direction issued by the Central Government under this Act, or in carrying out the functions or performing the duties imposed on it by or under the provisions of this Act, and that as a result of such failure, the Authority’s financial position or administration has suffered; or
- That circumstances exist that make it necessary in the public interest to do so, the Central Government may, by notification and for reasons to be specified therein, supersede the Authority for a period not exceeding six months and nominate a person to look after the Authority’s functions: Provided, however, that before issuing any such notification, the Central Government shall give the Authority a reasonable opportunity to respond.
The Warehousing Act of 2007 allows warehouses to be registered and negotiable warehouse receipts to be issued in electronic format. The Regulatory Authority will register and accredit warehouses that seek to issue negotiable warehouse receipts, as well as implement a system of quality certification and commodity grading to protect warehouse receipt holders’ rights against carelessness, malpractice, and fraud
Warehouse Receipts:
- A warehouse receipt, whether in writing or electronically, is a written record of title to goods.
- If a warehouseman wilfully omits any of the particulars specified in sub-section (1) from a negotiable warehouse receipt, he is accountable for the resulting damages.
- No warehouse receipt shall be ruled invalid for the purpose of settling disputes or claims only because of the deletion of any of the particulars specified in sub-section (1).
- Authority may add, delete, or amend any particulars mentioned in subclause (1) for all or any item or class of commodities, or for any class of warehouses, with the previous consent of the Central Government.
Negotiable Warehouse Receipt:
- The implementation of a negotiable warehouse receipt system in the country would not only assist farmers obtain better credit and prevent distressed sales, but it will also protect financial institutions by lowering risks associated with loan extension to farmers.
- The pledging of agricultural goods in the form of negotiable warehouse receipts will result in increased credit flow to rural regions and lower credit costs.
- It will also assure consistent grading, packing, insurance, and warehouse quality.
- Farmers would be allowed to seek loans from commercial banks on negotiable warehouse receipts if The Warehousing Act was fully implemented, rather than resorting to distress sales to meet their immediate financial requirements.
The Warehousing Act would raise warehouse standards in India since the WDRA will only register and accredit facilities based on certain requirements.
The Indian Parliament passed the Warehousing Act in September 2007 in order to ensure that farmers may store their produce in licenced warehouses and utilise warehouse receipts as a negotiable instrument.
What Is the Purpose of The Proposed Amendment?
- The amendment is to make godown registration mandatory, to increase the penalty for certain offences, and to eliminate the use of jail time as a punishment for the offences.
- Registration with the Warehousing Development and Regulation Authority (WDRA) is currently optional.
- Following the proposed change, which has yet to be approved by the Cabinet, registration of all third-party warehouses around the country would be done in stages.
- The central government will have the authority to exempt any type of warehouse from registering with the Authority.
- This ensures a smooth and non-disruptive transition to a regulated storage system.
Conclusion:
While the Ministry claims that the amendments are intended to help farmers gain access to quality warehouse services, the Samyukt Kisan Morcha (SKM) fears that the amendments are intended to reinstate certain provisions of the repealed Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act through the backdoor.
According to the Samyukt Kisan Morcha, the repealed Act also discussed comparable measures such as electronic trading on transaction platforms and freedom for trade at farmgate, cold storage, warehouse, and processing facilities.
