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CII organises two-day meet to seek regulatory framework for warehousing

Tuesday, 27 September, 2016, 08 : 00 AM [IST]

Pushkar Oak, Mumbai

With a view to promote and facilitate efficient handling of agricultural supply, the Confederation of Indian Industry (CII) organised a two-day conference, Agri Supply Chain 2016, in Mumbai. It sought a revised regulatory framework for warehousing development and identified more investments that should put into the sector’s development.

The welcome address was delivered by Sukumar Narasimhan, member, CII committee on logistics. He spoke on economic collaborations in the logistics sector, stating that CII collaborated with several institutions across India to facilitate trade and to establish a finite network of logistics.

“We have an institute of logistics, which is a centre of excellence in logistics and supply chain to provide short- and long-term courses on research and management in the industry. CII has curated this formal gathering for recommendations that can strive to provide a platform for development of a better logistics network and supply chain,” he added.

Speaking on the drivers of the logistics as a sector, Narasimhan said, “Global trade and advancements have resulted in much-needed regulatory reforms. Global trade has also led to a greater traceability among the sector.”

Anil Choudhery, founder and chief executive officer, National Bulk Handling Corporation (NBHC), spoke about the development needs of the logistics sector in his theme address.

He said, “We had a discussion in October 2015, and today we have come up with such a dedicated approach through this conference on supply chain.”

Some of the factors that need to be addressed are:

Identifying challenges in the sector
Geographic challenges like the weather need attention across the nation
Policy recommendations in this regard have to be submitted to the regarding authority
Supportive policies and environment will encourage the private sector to participate (which happened at the stage of liberalisation)
Increase investments in the sector where the private sector could play a vital role
Other climatic challenges, like those of rainfall, will be predominantly watched. Fifty per cent of the Indian population is dependent on agriculture for their livelihood. If India receives a rainfall deficit of only 7 per cent, it could lead to disastrous consequences. This is where warehousing and cold chains could be of great help
Small and marginal farmers which account to 85 per cent of the agrarian community. Need to develop some cost-effective storage aids in this end

Some of the initiatives which are being taken include:

Banks are presently lending around Rs 40,000-50,000 crore for the development of the warehousing sector
Agri-warehousing has shown good growth of around Rs 2,500 crore, which accounts for private equity holding

Sameer Shah, managing director and chief executive officer, National Commodity and Derivatives Exchange Limited (NCDEX), spoke on addressing strategic imperatives on three levels - warehousing, warehousing finance and technology adoption and use to avail maximum utilisation.

He said, “To offer access to small and marginal farmers to the market, we need to address issues strategically. This access should be with regard to grading, storage, distribution, risk assessment and insurance. Inflation control or a designed mechanism to control inflated commodities will enable farmers.”

“Till 2000, it was only the Food Corporation of India (FCI) and the Central and state authorities which had warehousing facilities. But now, private participation has risen up to Rs 2,000 crore, which comes to a compound annual growth rate (CAGR) of around 15-20 per cent,” Shah added.

He said the state government adopted technology to procure, store and sell commodities, adding that that led to a reduction in the cost of procurement.

Shah added, “Complicated legal structures need streamlining as there are state and local legislations, which make it more tedious to operate. A positive indicator in this regard is that the banks today have gained trust among farmers as they have started operating on the transparent platforms like e-NAM (National Agriculture Market).

P K Bandlish, chief general manager, Securities Exchange Board of India (SEBI), stated that SEBI was working on a new set of norms for warehouses under exchanges with clarity on their ownership and functioning. “Even the dispute over quality and quantity has to be resolved under a fast track process,” he added.

G Raghuram, professor, public system group, and dean, faculty, Indian Institute of Management (IIM), Ahmedabad, shared the success stories of efficient players in the market like the Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) and the National Dairy Development Board (NDDB) and the factors which should be considered with reference to the market.

They are:

Food security: Nutrition or security?

Whether the food security provisions are created with regard to offer security or to impart nutrition.

Demand profile: Routine or disaster?

Is the demand a routine market demand or is it is a result of calamity?

Benefits transfer: Strategic reserve or product type?

Is it that the transfer takes place as a part of strategy or is it dependent on the type of product like pulses and essential commodities?

Raghuram elaborated on storage movement, stating that Punjab and Haryana were well equipped on that front.

The inaugural session ended with some key information by Suresh Khatanhar, executive director, IDBI Bank.
He said, “Currently the value chain accounts for one lakh private warehouses. Public sector undertakings (PSU) have played a vital role in the development of logistics and storage. The agriculture sector, whose contribution to the gross domestic product is 18 per cent, feeds a population of 1.2 billion, which simultaneously opens more opportunities for the supply chain involved in the agriculture sector.”

Session one was dedicated to Infrastructure creation for agri warehousing in the private sector: Administrative and fiscal perspectives.

There was a panel discussion chaired by Raghuram. He said, “Aggregation at all levels in the logistics chain will help maintain quality and facilitate price control and ensure regular supply.”

Neeraj Bhatia, chief business officer, NBHC, said, “East India needs infrastructure development, as there is a shortage of warehouses and storage is a challenge in peak seasons.”

He highlighted the need to build large warehouses, stating that the movement in the commodities resulted in the cost of one month’s warehouse rent, which was not the case in other sectors.

Varghese Abraham, vice-president, business development, Total Group, said, “We need to develop technology which is affordable, can be used widely and can be made easily available across the nation.”

“For example, Finland has developed a technology which can be set up in the farm area itself and can serve as a cold chain till the produce is sold,” he added.

“Cold storage doesn't even work out to one per cent of what warehouses account to. There is a need to plan accordingly so that the loss is less and price can be controlled,” Abraham stated.

“In the automobile sector, if a company plans to manufacture 200 cars, which will require 86,000 different components, the company will plan from where it will get those components, through which modes will it reach the assembly line and in what time. Such a model should be established in food logistics and agri-logistics too,” he added.

K L Prabhakar of the department of storage and marketing, National Bank for Agriculture and Rural Development (NABARD), highlighted the initiatives it had undertaken.

Ajay Kakra, director, agri and natural resources, PwC, said, “The new warehouses that will be developed, including the cold storages, should be supported by agricultural produce marketing committees (APMC) across the nation.”

“We also should develop technology to monitor consignments to track the movement along the supply chain,” he added.

“Reefer vehicle transport through rail using technology will also be a a good option, but due to the high rates charged and the time consumed in the rail transport, it is currently not a reliable one,” Kakra added.

Prabha Chokhani, manager, New India Assurance Co Ltd, spoke about insurance, claims and clauses, policies regarding warehousing and storage, stocks and third-party losses.

The second technical session was dedicated to the regulatory framework for the agri warehousing sector.

K Ganesh, knowledge expert and head, global supply chain management (SCM) centre of excellence, McKinsey and Company, spoke on several positive indicators where the agriculture sector showed a positive growth, which opened opportunities for warehousing and cold storages.

He said, “The Warehousing Development and Regulatory Authority (WDRA) norms are unclear in today’s context. The definitions need a review and alteration.”

Sarat Mulukutla, chief commercial segment, NCDEX, stated, “The SEBI guidelines state that all the exchanges that deal in commodity trade have to comply with the WDRA norms, but they are unclear with regard to definitions. The exchanges are unable to comply due to unclear norms.”

S K Mohanty, executive director, SEBI, clarified that the norms laid down by it were with regard to a good practice which was to be included in the new businesses.

“The norms which are left unclear with reference to the WDRA need alteration but it doesn't affect or acts contradictory to the other norms. Rather it is just a set of guidelines issued for a better environment,” he added.

Mulukutla, drawing reference to the recent Food Safety and Standards Authority of India (FSSAI) notification on raw pulses said, “The FSSAI should keep its checks at the stage where the raw pulses arrive at the very first destination, that is warehouses, so that all the warehouses will comply with the norms and the farmers will also be aware of the new norms.”

Other speakers included Jaya Prakash, chief operating officer, Star Agri-warehousing and Collateral Management Ltd, and Sumesh Parasrampuria, chief executive officer, Kunvarji Group.