Scaling-Up Warehousing Finance Can Empower Farmers in the Long Run

Indian farmers, unlike the producers in other sectors, continue to be price takers instead of price setters. With over 80% being smallholders, farmers are often subjected to distress sale in order to meet their immediate financial needs and also due to lack of storage facilities to hold until they receive remunerative prices.

As a result, farmers’ share in consumer price for major agricultural commodities has remained significantly low at below 30-40%. Under such scenario, access to warehousing finance through electronic Negotiable Warehouse Receipts (eNWRs) could potentially enhance farmers’ holding capacity and bargaining power to get remunerative prices, thereby resulting in better incomes.

Promoting warehousing receipt financing for agricultural commodities

According to the Warehousing Development and Regulatory Authority (WDRA), while the credit guarantee against eNWRs that commenced on February 12, 2025 is one of the many policy measures initiated over the last 15 years, the progress of post-harvest financing through eNWRs has reached about 1.24 million tonnes, less than 1% of 330 million tonnes of food grains produced in 2023-24.

Such a scenario necessitates urgent measures to scale-up farmers’ access to warehousing and eNWR financing.

While the idea to promote warehousing receipt financing for agricultural commodities near production centres was proposed as early as in 1950s, the efforts were started only in the 2000s. The All India Rural Credit Survey Committee in its report, submitted to the Reserve Bank of India (RBI) in 1954, recommended ‘to create scientific storage facilities for the farmers near their doorstep and also to create a negotiable warehouse receipt system to facilitate credit to farmers’.

The measures to create warehousing capacity across the country were started in the late 1950s with the establishment of the Central Warehousing Corporation (CWC) and State Warehousing Corporations in 1957. However, the focus was primarily for storage of foodgrains procured for buffer stocks and public distribution. As a result, the availability and access of such storage facilities by farmers’ was negligible till the early 2000s.

In this regard, the National Policy on Handling, Storage, and Transportation of Foodgrains, introduced in 2000, has promoted the private and cooperative sector agencies to actively participate in the development of warehousing with subsidised capital and interest rates.

Further, the measures to create warehouse receipt financing system through eNWRs also started with the enactment of Warehousing (Development and Regulation) Act, 2007 and the setting up of WDRA in 2010.

The regulated warehouses, after registering with WDRA, are permitted to issue eNWRs and the farmers can get finance from banks pledging these eNWRs.

Nevertheless, despite various efforts, growth of warehouse receipt financing has remained dismal from about 1.35 lakh tonnes in 2011-12 to about 12.4 lakh tonnes in 2023-24, accounting for about 0.5% of the total existing warehousing capacity in the country. In this regard it is pertinent to note that major users of such warehousing and eNWRs were traders and not farmers, according to a research study by IIM Bangalore in 2022.

Furthermore, the coverage of eNWRs has largely been confined to two repositories – CDSL Commodity Repository Ltd. (CCRL) and National e-Repository Ltd (NeRL) that are associated with commodity derivatives exchanges and acted as collateral managers.

Challenges and way forward

One of the major challenges is the substantial gap in the existing warehousing capacity. Total agricultural warehousing capacity in the country is estimated at around 240 million tonnes till March 2024 according to WDRA. But, the annual output of food grains alone is over 330 million tonnes and that of oilseeds is around 40 million tonnes in 2024-25. After considering the output of horticultural crops and plantations, the gap in the existing storage capacity is much more substantial.

Another major challenge is the slow growth in private sector warehousing capacity, despite various incentives schemes. Consequently, public sector agencies accounted for nearly 50% of the total warehousing capacity, while the private sector accounted for about 45% and the cooperatives accounted for the rest.

The extent of regulated warehouses registered with WDRA is also very scanty. As per the data published on the WDRA portal, the active regulated warehousing capacity in the country as at the end of March 2025 is only about 44.8 million tonnes . Some of the important reasons for the limited progress in regulated warehousing include lack of conflict resolution procedures and innovative cost effective storage methods particularly for small quantities of produce.

Constraints such as small quantities of produce and loan amount not attracting banks to finance, lack of awareness and knowledge among farmers, banks preference for collateral managers are also adding to costs for farmers etc., and limiting the progress of warehouse receipt financing in the country.

Source: WDRA Annual Report 2023-24

Considering the potential of eNWRs in empowering farmers in raising their incomes, there is an urgent need to scale-up regulated warehousing and finance with the requisite measures. Towards this, (Farmer Producer Organisations) FPOs can be encouraged to play an active role in creating regulated warehousing capacity.

In this regard, ecommerce platforms engaged in grocery delivery can partner with FPOs in creating and using warehousing space, thereby connecting farmers to commodity value chain.  This will in turn help in generating rural non-farm employment.

A. Amarender Reddy, is joint director, School of Crop Health Policy Support Research (SCHPSR), ICAR-National Institute of Biotic Stress Management (ICAR-NIBSM), Raipur.

Tulsi Lingareddy is a senior economist, Sustainable Finance and Agriculture, Mumbai.

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