'We allow farmers to time their sales'We find getting our rightful dues from insurers a long-winded process, leading to undue stress on our financials.
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NBHC Managing Director and Chief Executive Officer Anil Choudhary. DH Photo by Srikanta Sharma R
National Bulk Handling Corporation (NBHC), a private sector warehousing company owned by the India Value Fund, has expertise in managing over 190 commodities, including grains, cash crops such as cotton, and various non-agricultural commodities.
NBHC has managed about Rs 66,000 crore worth of assets for 44 banks, enabling post-harvest farm credit of about Rs 45,000 crore with dedicated focus on the farmer.
In quantity terms, the company has managed about 27 million tonnes for banks alone and carried out preventive treatment and fumigation for about 42 million tonnes of commodities.
NBHC Managing Director and CEO Anil K Choudhary tells Deccan Herald’s Umesh M Avvannavar about how the company has brought about a qualitative difference for farmers.
What is warehouse receipt?
Warehouse receipt is an instrument issued by a warehouse which attests to the receipt of goods into their custody. It normally specifies the quality, quantity, and the value.
How is it financed?
Traditionally, banks had lots of concerns about financing against agriculture commodities. The modus used by banks for whatever little financing did was to fix a limit on the warehouse/cold storage and then fund against the warehouse receipt/cold storage bond issued by them.
The risk perception was very high for banks. Particularly, they worried about the quality and quantity assessment, and by extension, the maintenance of quality/quantity during the loan period.
They were also concerned about timely information on price movements. Another area of concern was disposing of the commodity in case of default. With the advent of companies like NBHC, bank concerns in all these areas were effectively addressed.
The way it works is that a farmer, trader, processor etc., deposits the goods in warehouses managed by NBHC/cold storages. NBHC then issues warehouse receipts which go directly to the bank after the necessary security documentation.
On receipt of this, the bank extends loan to the respective depositor. The loans are typically for 9-12 months and a major part of such lending qualify as priority sector lending. The interest rate varies from 10.25 per cent to 12.5 per cent.
How many states and commodities do NBHC cover?
We have a very extensive reach. We have worked in 23 states and have capabilities in over 190 Commodities. When we started business with banks in 2006, they were ready to fund only 15 to 16 agricultural commodities which were traded on commodity future exchanges.
But after benefiting from our services continuously without impairment or loss, banks are now ready to fund all agricultural commodities taken by us.
What are your strengths?
Our biggest strength is our integrated platform. NBHC is perhaps the only company with a huge network with its own quality laboratories, commodity care, and pest management capabilities across the country.
But above all, the integrity and efficiency with which NBHC has executed all assignments successfully in eight to nine years has brought unprecedented liquidity against agricultural commodities on much better terms to all the participants of the farm ecosystem.
NBHC has demarcated responsibilities of different sets of people at the warehouse level to ensure complete integrity in warehouse receipt operations. We also have an independent audit and surveillance system which regularly does surprise audits of warehouse receipts.
How does a farmer benefit by storing his commodities with NBHC?
In India, perhaps one of the biggest challenges faced by a farmer is getting remunerative prices. Though the government runs minimum support price (MSP) programmes in several commodities, effectively only in two commodities, paddy and wheat, are there any substantial MSP activity.
But the MSP activity in these two commodities are also limited to a few states. Further, market linkages available to farmers are not efficient. All of these result in the distress sale of farm produce, leading to an average farmer realising just about 30-40 per cent of the value of his produce.
An effective solution for this involves providing farmers with the opportunity to time their sales. NBHC plays a role in that effort as goods deposited with us by farmers get liquidity on very easy terms from banks and that gives farmers the leeway to hold on to their commodities and sell them at an opportune time when prices are favourable.
What is your reach in Karnataka. How many farmers are using your service?
In Karnataka, we have three offices located at Belagavi, Shivamogga and Raichur. We have been able to manage agricultural commodities worth over Rs 3,500 crore against which banks have lent over Rs 2,600 crore over a period of seven to eight years.
How many banks are financing your receipts and expansion plans?
Canara Bank has become the 45th banking partner of NBHC and is expected to help us tap additional geographies. We have added one more cooperative bank in Maharashtra. We want to take up collateral management partners to 50 by March 2015.
We have been recently accredited by NCDEX as their warehouse service provider. We have also tied up with NEML (National Electronic Market), a physical and spot delivery platform.
We, therefore, believe that we are all set to effectively serve the entire farm commodity ecosystem on the post-harvest side. We are also expanding our supply chain services through private sector entities.
What are the challenges you face?
The business is very operation-intensive. Maintaining integrity and fidelity of operations at the warehouse level remains a big challenge. The non-availability of trained manpower to manage operations at the ground level is another hurdle.
While we cover our risk through robust operational processes, audit and surveillance, in the event of mishaps we have to take recourse to insurance. We find getting our rightful dues from insurance companies a long-winded process, leading to undue stress on our financials.
Let us understand and appreciate that the business is very low margin and risk mitigation tools like insurance does not work effectively. So further growth in the sector will be constrained.
NBHC has managed about Rs 66,000 crore worth of assets for 44 banks, enabling post-harvest farm credit of about Rs 45,000 crore with dedicated focus on the farmer.
In quantity terms, the company has managed about 27 million tonnes for banks alone and carried out preventive treatment and fumigation for about 42 million tonnes of commodities.
NBHC Managing Director and CEO Anil K Choudhary tells Deccan Herald’s Umesh M Avvannavar about how the company has brought about a qualitative difference for farmers.
What is warehouse receipt?
Warehouse receipt is an instrument issued by a warehouse which attests to the receipt of goods into their custody. It normally specifies the quality, quantity, and the value.
How is it financed?
Traditionally, banks had lots of concerns about financing against agriculture commodities. The modus used by banks for whatever little financing did was to fix a limit on the warehouse/cold storage and then fund against the warehouse receipt/cold storage bond issued by them.
The risk perception was very high for banks. Particularly, they worried about the quality and quantity assessment, and by extension, the maintenance of quality/quantity during the loan period.
They were also concerned about timely information on price movements. Another area of concern was disposing of the commodity in case of default. With the advent of companies like NBHC, bank concerns in all these areas were effectively addressed.
The way it works is that a farmer, trader, processor etc., deposits the goods in warehouses managed by NBHC/cold storages. NBHC then issues warehouse receipts which go directly to the bank after the necessary security documentation.
On receipt of this, the bank extends loan to the respective depositor. The loans are typically for 9-12 months and a major part of such lending qualify as priority sector lending. The interest rate varies from 10.25 per cent to 12.5 per cent.
How many states and commodities do NBHC cover?
We have a very extensive reach. We have worked in 23 states and have capabilities in over 190 Commodities. When we started business with banks in 2006, they were ready to fund only 15 to 16 agricultural commodities which were traded on commodity future exchanges.
But after benefiting from our services continuously without impairment or loss, banks are now ready to fund all agricultural commodities taken by us.
What are your strengths?
Our biggest strength is our integrated platform. NBHC is perhaps the only company with a huge network with its own quality laboratories, commodity care, and pest management capabilities across the country.
But above all, the integrity and efficiency with which NBHC has executed all assignments successfully in eight to nine years has brought unprecedented liquidity against agricultural commodities on much better terms to all the participants of the farm ecosystem.
NBHC has demarcated responsibilities of different sets of people at the warehouse level to ensure complete integrity in warehouse receipt operations. We also have an independent audit and surveillance system which regularly does surprise audits of warehouse receipts.
How does a farmer benefit by storing his commodities with NBHC?
In India, perhaps one of the biggest challenges faced by a farmer is getting remunerative prices. Though the government runs minimum support price (MSP) programmes in several commodities, effectively only in two commodities, paddy and wheat, are there any substantial MSP activity.
But the MSP activity in these two commodities are also limited to a few states. Further, market linkages available to farmers are not efficient. All of these result in the distress sale of farm produce, leading to an average farmer realising just about 30-40 per cent of the value of his produce.
An effective solution for this involves providing farmers with the opportunity to time their sales. NBHC plays a role in that effort as goods deposited with us by farmers get liquidity on very easy terms from banks and that gives farmers the leeway to hold on to their commodities and sell them at an opportune time when prices are favourable.
What is your reach in Karnataka. How many farmers are using your service?
In Karnataka, we have three offices located at Belagavi, Shivamogga and Raichur. We have been able to manage agricultural commodities worth over Rs 3,500 crore against which banks have lent over Rs 2,600 crore over a period of seven to eight years.
How many banks are financing your receipts and expansion plans?
Canara Bank has become the 45th banking partner of NBHC and is expected to help us tap additional geographies. We have added one more cooperative bank in Maharashtra. We want to take up collateral management partners to 50 by March 2015.
We have been recently accredited by NCDEX as their warehouse service provider. We have also tied up with NEML (National Electronic Market), a physical and spot delivery platform.
We, therefore, believe that we are all set to effectively serve the entire farm commodity ecosystem on the post-harvest side. We are also expanding our supply chain services through private sector entities.
What are the challenges you face?
The business is very operation-intensive. Maintaining integrity and fidelity of operations at the warehouse level remains a big challenge. The non-availability of trained manpower to manage operations at the ground level is another hurdle.
While we cover our risk through robust operational processes, audit and surveillance, in the event of mishaps we have to take recourse to insurance. We find getting our rightful dues from insurance companies a long-winded process, leading to undue stress on our financials.
Let us understand and appreciate that the business is very low margin and risk mitigation tools like insurance does not work effectively. So further growth in the sector will be constrained.