Prospects of Infra Structural Financing for Warehousing

8/8/2019 Prospects of Infra Structural Financing for Warehousing

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Address onAddress on

Prospects of Infrastructural financing in Warehousing

AtAt

ASSOCHAM House, 47, Prithviraj Road, Opposite Safdarjung Tomb, New Delhi,INDIA

[November 15th, 2010 from 9.30 AM - 1.30 PM]

byby

Saurabh AgarwalSaurabh AgarwalViceVice--Chairman, Indian Institute of Finance, Delhi, INDIAChairman, Indian Institute of Finance, Delhi, INDIA

Saurabh Agarwal, Prospects of Infrastructural financing in WarehousingSaurabh Agarwal, Prospects of Infrastructural financing in Warehousing


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AcknowledgementsAcknowledgementsThe author gratefully acknowledge the technical support of IndianInstitute of Finance and Faculty of Management Studies (DU). Wewould specially like to thank Prof. J. D. Agarwal (IIF), Prof. ManjuAgarwal (DU) and Prof. Madhu Vij (FMS) who have inspired me inmany 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 givingme their suggestions and comments.

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



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Section I:Section I: OverviewOverview

Section II:Section II: Micro Economic PerspectiveMicro Economic Perspective

Section III:Section III: Investment OpportunitiesInvestment Opportunities

Food grainsFood grains

HorticultureHorticulture

Water StorageWater Storage

Data WarehousingData Warehousing

PortsPorts

Public Private PartnershipPublic Private Partnership

Section IV:Section IV: Financing Infrastructure and BusinessesFinancing Infrastructure and Businesses

FocusFocus



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Warehousing Development and Regulatory Authority (notifiedWarehousing Development and Regulatory Authority (notified

October 2010)October 2010)

Warehousing (Development and Regulation) Act, 2007Warehousing (Development and Regulation) Act, 2007

Effects of the Act and AuthorityEffects of the Act and Authority

Few takers for Centres Subsidized Food grain releaseFew takers for Centres Subsidized Food grain release

Supreme Court Remark Give it free instead of wasting itSupreme Court Remark Give it free instead of wasting it

Recommendation of Smt. Sonia Gandhi headedRecommendation of Smt. Sonia Gandhi headedNationalNational

Advisory CouncilAdvisory Councilfor providing subsidised food grains tofor providing subsidised food grains to

everyone in 150 poorest districts of Indiaeveryone in 150 poorest districts of India


Overview


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Agricultural economy and surplus production

Mohenjodaro

Great Granary of Mohenjodaro consisted oftwenty sevenblocks of brickwork criss crossed by ventilation channels

Presence of loading bays from which the grains were raised

in the storage .

HarappaHarappa has two rows ofsix granaries. The total area was

about 800 sq. m.

Area for threshing grains

Glorious Indus Valley Civilization


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235.13 (in lakh MT) of foodgrains with FCI (10/2010)

Storage

Better warehousing will enable better management ofInflation

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

Foodgrains


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FIFO Technology to be part of the Warehousing Policy

System of Containers marked with date of storage to

enable quick transportation and disaster managementIn- Out Method of Storage

Storage


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Y shaped Storage of

Food grains


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How to Manage Warehouses

Adoption of EOQ Method to manage foodgrains

Quantity

Period

Maximum

Average

Minimum

Danger Zone


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Warehouse Receipt Financing Agricultural and Non

Agricultural Commodities

The negotiability of warehouse receiptThe negotiability of warehouse receipt

Registration and accreditation of warehouses intending toRegistration and accreditation of warehouses intending to

issue negotiable warehouse receiptsissue negotiable warehouse receipts

System of quality certification and grading of commoditiesSystem of quality certification and grading of commodities

How will the farmers and Financial Institutions BenefitHow 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 takers to that of price negotiatorsprice negotiators

Is There a Downside for the Farmer?


Micro Economic Perspective


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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, aggregatessupercomputing 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.

Data Warehousing & Electronics and

information technology


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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.

Ports Warehousing Investment Opportunities


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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

non-agricultural commodities

Decentralized Procurement Scheme (DCP)



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FinancingFinancing

A. Domestic FinancialMarkets:

i. Equity finance

ii. Debt Finance

iii. Domestic Capital Market

iv. Financial Developmental Institutions

B. International FinancialMarkets:

i. Multilateral Institutions

ii. Export Credit Agencies (ECA)iii. External Commercial Borrowing (ECB)

iv. Syndicated Loans

v. Private placement

vi. Global Depository Receipts (GDRs)

vii. Weather Derivatives & Hybrid Instruments


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C. Internal Resources

D. Public Private Partnership

E. Forward Need Financing

This will prevent cost of capital being added to cost of

foodgrains

FinancingFinancing


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Thank YouThank You

forforyour Patienceyour Patience

If you have any unanswered Questions . You can reach me atIf you have any unanswered Questions . You can reach me [email protected]


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Prospects of Infra Structural Financing for Warehousing