CHAPTER - III WAREHOUSING BUSINESS IN INDIA & CENTRAL WAREHOUSING CORPORATION

CHAPTER - III WAREHOUSING BUSINESS IN INDIA & CENTRAL WAREHOUSING CORPORATION

3.1 Introduction After detailed discussion on the overview of warehousing in the previous chapter and in order to have indepth analysis on the warehousing business in India, it is planned to discuss the development of warehousing business in India and the role of Central Warehousing Corporation. For this purpose, the chapter has been divided in two sections, the first part deals with the warehousing business in India while the other part deals with the premier warehousing agency at all India level i.e., Central Warehousing Corporation. 3.2 Warehousing Business In India Indian history is full of references to food grains storehouses; the Cholas, Nayak and Mahrattas had them. There are large grain storage structures built by Chhattrapatti Shivaji at Panhala in Maharastra. In Tamil Nadu, the Palace at Tanjavur and another at Tiruvaiyur nearby also indicate having the ancient storage structures. The public sector warehousing was developed in India with the twin objectives of storing the agriculture produce and other notified commodities in a scientific manner with pest free condition and preventing the farmers from distress sell of their hard raised crops. Presently, there are three major public sector agencies playing crucial role in the field of warehousing in the multi-tier system of warehousing which was recommended by the Rural Banking Enquiry Committee (1954) viz., Food Corporation of India (FCI), Central Warehousing Corporation (CWC) and State Warehousing Corporations (SWCs). It has been noted that the Ministry of Consumer affairs, Food and Public Distribution is the controlling ministry for administration and implementation of various agricultural, food and consumer affairs related policies in India. The present warehousing in India passed through various stages and enactments.

53 The need for warehouses began to be increasingly felt in the context of the policy of extension of agricultural credit to rural areas. It was necessary to provide adequate scientific storage facilities for the preservation of food grains and other allied agricultural produce. The emergence of licenced warehouse in India was the outcome of implementation of recommendations made by various committees constituted to look after the problems faced by the rural mass. The recommendations of few committees are discussed below. 3.2.1 Royal Commission on Agriculture The establishment of licensed warehouses in India was first recommended by the Royal Commission on Agriculture in 1928. The importance of warehousing was felt seriously and the Reserve Bank of India in the year 1944 urged all the State Governments by issuing directions to enact legislation for setting up of warehouses in their concerned States. 3.2.2 Agricultural Finance Sub-Committee The Government of India appointed a Sub-Committee under the chairmanship of late Prof. D.R. Gadgil to report on the ways in which indebtedness could be reduced and finance, both short-term and long-term provided under efficient control for agriculture and animal husbandry operations in accordance with the recommendations of the Policy Committee on Agriculture, Forestry and Fisheries in the year 1944. The Committee submitted its report in 1945 and observed that the volume of finance supplied by the commercial banks to the agriculturists could be considerably increased by improving the arrangements for marketing of crops by grading and standardization, creation of proper storage facilities and ushering in regulated markets. The Committee felt that the establishment of warehouses in which the goods could be stored against a negotiable receipt usable for obtaining loans from banks, be introduced in India. The Committee was of the view that these steps would open up an important channel for the commercial banks to provide finance to the agriculturists.

54 The Committee also felt that the State should undertake, as part of its programme, the planning and construction of warehouses at all nuclear points of trade in agricultural produce and that such a system should be operated by a public-corporation. The main thrust of the recommendations of the Committee is on the agricultural marketing and warehouses considered as an extension of the system of transport and the planning of the location of warehouses. It must be done as part of planning the extension and improvement of transport facilities. The construction of a chain of warehouses is unlikely to attract immediately sufficient private capital and it might also not be desirable to leave the running of the warehousing system in private hands. The recommend that, the State should itself undertake, as part of its programme of development of rural transport, the planning and construction of warehouses at all nuclear points of trade in agricultural produce. The warehousing system should be operated by a public corporation organized on lines similar to those of Improvement Trusts or Port Trusts. This would provide for a better and more economic management of the system than if the warehouses were owned by individuals or particular sale societies and would also facilitate the issue of warehouse bills. 3.2.3 Rural Banking Enquiry Committee In 1949, the Rural Banking Enquiry Committee was appointed by the Government of India. Among its terms of reference, the committee was to consider measures that could be adopted for the extension of banking facilities in rural areas. In relation to promotion of warehousing, the committee observed that lack of proper facilities for the storage and warehousing of agricultural produce has been a serious obstacle in the way of increasing the scale of advances against agricultural produce by cooperative marketing societies or commercial banks. The foreign experts associated in the central banking inquiry committee pointed out the impact due to lack of proper facility on storage and warehousing on the scale of advances. The committee conclude that improvement in the credit situation and the money market in India could be

55 achieved only by improving and extending the storage and warehousing facilities for good in order to enlarge the basis of the credit system. The Committee recommended that Provincial Governments should consider the desirability of advancing long-term loans at concessional rates of interest to cooperative societies to build godowns in centers which provided good markets. It also proposed that the Railway Board should also examine the feasibility of constructing railway warehouses at selected centers or allowing private parties to build such warehouses on favorable terms. The Committee noted that the question of enacting appropriate legislation for licensing warehouses was taken up by the Reserve Bank of India which circulated a draft bill for this purpose to the Provincial and State Governments. On the model of this bill, Acts were passed in Bombay, Madhya Pradesh, Travancore and Cochin. In spite of this, no independent warehouse came into existence. The Committee was of the view that without greater initiative and assistance from the State, much progress in this direction not likely to be achieved. The Rural Banking Enquiry Committee considered two courses of action: firstly, it considered the scheme suggested by Gadgil Committee that a chain of warehouses should be constructed by the State at all nuclear points of trade in agricultural produce and this should be operated by a Public Corporation. The second alternative was the provision of loans and subsidies to cooperative institutions and commercial banks for building their own godowns in accordance with certain approved specifications. The Committee did not favour the first alternative as it would, in its view, have entailed heavy financial commitment. It found the second alternative to be more realistic as it would not require an elaborate organization. This recommendation was conceived as a short term measure as it appeared to be a more feasible plan to the committee as the banks could make larger funds available than the cooperative marketing societies.

56 The Committee recommended that a Warehousing Development Board be set up with funds contributed by the Central Government, the Reserve Bank of India and the provincial Governments. In the view of the Committee, this Board was to be entrusted with the responsibility of promoting warehousing in the country. The Board was to receive, scrutinize and approve applications of commercial banks and cooperative institutions for financial assistance for the construction of warehouses which would be of such specifications and be erected at such centre as were approved by it. The Committee also recognized the fact that warehousing was a capital intensive activity which would not be attractive to private enterprise and, therefore, it advocated that the State should enter into this field. Agencies for promoting this activity were also suggested. These recommendations, however, did not immediately lead to any tangible result. The development of adequate scientific storage facilities failed to make head way despite the efforts and steps taken by the Reserve Bank of India. Little or no interest was taken by the State Government in the development of public warehousing. These developments underlined the need for the establishment of a strong central agency entrusted with the responsibility of promoting warehousing. 3.2.4 Rural Credit Survey Committee (1954) Public warehousing, as we know it today, stems from the recommendations of the Committee of Direction of the All-India Rural Credit Survey Committee. It would, therefore, be appropriate to go into some details of the reasons which led that Committee to formulate its recommendations regarding the establishment of Warehousing Corporation. In February, 1951, the Reserve Bank of India had convened an informal conference of cooperators, economists and others including the Registrars of Cooperative Societies of some of the States for considering, among other things, the steps necessary for enlarging the volume of

57 agricultural finance to the agriculturists through the cooperative credit system. This informal conference recommended that the Reserve Bank of India should undertake a rural credit survey which should include all strata of the rural population and cover problems of capital formation in the rural areas as well as the credit requirements of both economic and indigent farmers. This recommendation was accepted and in August, 1951, the Committee of Direction for carrying out an All India Rural Survey was constituted by Shri B. Rama Rao, the then Governor of the Reserve Bank of India with the following terms of reference:- i. to direct planning, organization and supervision of the survey; ii. to interpret its results; and iii. to make recommendations. This Committee was constituted in the background of the demands reiterated in Parliament and elsewhere, that a more constructive role should be played by the Reserve Bank of India in the sphere of rural credit; and its policies and activities should be so reoriented as to enlarge its participation in the extension of rural credit. The Committee in reference to the problem of storage observed that lack of storage is part of a wider deficiency namely, the lack of orderly marketing, cooperative or other. Such storage as exists is mostly for cotton, jute and similar commercial crops and is largely in the hands of traders and processing concerns. Before the Second World War, the storage available was largely in the form of private godowns owned by the more substantial cultivators, the wholesalers, etc. During the war, the different Governments requisitioned a large number of private godowns for stocking their food grains; they also constructed a certain number of new godowns.several of these godowns, old or new, private or, State owned are still in the possession of Government.

58 3.2.5 Emergence of Public Sector Warehousing The beginning of public Warehousing in India got recognized with the enactment of agricultural produce (Development & Warehousing) Corporation Act. The Act categorically states the setting up of public sector warehousing agencies at all India level (CWC) and state level (SWCs). According to the Act, the share capital of the CWC was to be subscribed by National Co-operative (Development and Warehousing) Board and other institutions like the Banks, Co-operative Societies, Insurance Companies etc. The shares of the Corporation were guaranteed by the Central Government as to the repayment of the principal and payment of annual divided at a minimum rate which was to be fixed by the Central Government. The Warehouses of the Corporation could be utilized only for the storage of agricultural and allied produce. There was no provision in the Act enabling the Corporation to take up the storage of commodities other than agricultural produce, inputs and implements. The Agricultural Produce (Development and Warehousing) Corporation Act also provides the establishment of State Warehousing Corporation (SWCs) in different States. The share capital of the SWCs was to be subscribed by the Central Warehousing Corporation and the State Government concerned with equal ratio. Thus, both the Central Warehousing Corporation and the State Governments were to be equal owners of the State Warehousing Corporation In an enquiry conducted by the Reserve Bank of India in 1952, information was collected by means of a questionnaire as to the state of existing godowns and their suitability for conversion into licensed warehouses. The replies indicated that some of the Government godowns could be readily converted into regular warehouse so far as the technical quality of the accommodation was concerned. Some, however, were not suitable for various reasons, e.g., they were situated at too great a distance from trading centres or required considerable repairs including major structural alterations.

59 The godowns owned by cooperative were reported in most instances to be not fit for conversion into warehouses. The generality of them being makeshift structures built out of makeshift recourses. Private godowns were as a rule inconveniently situated (e.g. in residential houses) and in many cases were structurally defective. The replies further indicated that in very few marketing centres in the country could storage accommodation be said to be anywhere near adequate. In totality, the problem of the rural economy as revealed by the survey due to the lack of adequate and proper storage facilities. The Committee in its report pinpointed this deficiency and expressed the need for an extensive network of godowns and warehouses and for establishment of licensed warehouses at suitable centres. Emphasis was laid on these by the earlier Committees and Commissions also. The Committee also noted that despite various efforts, the scheme of establishing licensed warehouses had made no headway in any State and the existing godowns were not fit to be run as warehouses as a number of them were makeshift structures and inconveniently situated besides some of them were also structurally defective. The inadequacy of the warehousing facilities was considered by the Committee as one of the gravest economic handicaps of the cultivator and expressed its view that for its solution, a concerted and countrywide effort had to be made. In this respect, the Committee observed that the direction and endeavor required may well be compared to those which have gone into the construction of the railway system or lying out of the road ways. The integrated solution conceived by the Rural Credit Survey Committee in its report on the multifaceted problem brought out by the survey, was, development of Co-operative credit; The Co-operative economic activity, specially marketing, processing and storage, warehousing and distribution; rural and co-operative banking facilities; and facilities for the training of personnel.

60 The solution envisaged in regard to the development of storage and warehousing included in its compass state entrepreneurship including financial partnership, for the benefit of the rural producer. Thus the development of warehousing was to be accomplished under State entrepreneurship and with public funds. The Committee envisaged the participation of the State Governments at the intermediate level but at the all- India level, it envisaged deriving funds not only from the Central Government but also from the various insurance and other financial institutions. The concrete recommendations in this regard were: I. The establishment of a National Board to be called the National Cooperative Development & Warehousing Board" which has to plan and finance the scheme and to be the in-charge of the function of storage and warehousing on the one hand and on the other hand, distribution of basic and standardized requirements of cultivator as producer and consumer. II. The establishment of an all India Warehousing Corporation with the investment in the share capital by Central Government and various institutions and the establishment of State Warehousing Companies in which the State Governments and the All-India Corporation were to participate,. III. The Co-operative Societies at the base. The recommendations of the Committee with regard to the establishment of the multi-tier system referred to above were neither isolated nor independent of other factors. It had to be considered in the context of the totality of the problem. The solution to the problem was an integrated scheme formulated by the Committee. The development of warehousing and storage with State participation and the multi-tier system having organic links with the Central Warehousing Corporation Based on the recommendation of the committee the Agricultural Produce (Development and Warehousing) Corporations Act, 1956, was enacted by the Parliament. The

61 recommendations of the Committee in regard to the establishment of a National Co-operative Development and Warehousing Board and the Central Warehousing Corporation were generally accepted by the Government. The following are the set up as envisaged by the committee: i. National Cooperative Development Warehousing Board The National Co-operative Development & Warehousing Board as well as the Central Warehousing Corporation was to be established by statue. The State Warehousing Companies were also to be established by statutes. The composition of the National Co-operative Development and Warehousing Board was also suggested. This was to be a high-powered Board with a Standing Committee. The Board was to act through the All- India Warehousing Corporation (Central Warehousing Corporation) for the discharge of such of its functions as they pertained to warehousing. In regard to distribution, the Board s functions were principally to be those of planning, directing and co-ordination of the activities of the All-India Warehousing Corporation and the State Warehousing Companies. The development board was set up with the following objectives. i. To provide funds to warehousing corporations and the State Governments for financing co-operative societies for the purchase of agricultural produce on behalf of the Central Government. ii. To advance loans and grants to State Governments for financing cooperative societies engaged in the marketing, processing or storage of agricultural produce including contributions to the share capital of these institutions. iii. To subscribe to the share capital of the Central Warehousing Corporation and advance loans to State Warehousing Corporations and the Central Warehousing Corporation;

62 iv. To plan and promote the programmes through co-operative societies for the supply of inputs for the development of agriculture and to administer the National Warehousing Development Fund, ii. All India Warehousing Corporation- Central Warehousing Corporation The All-India Warehousing Corporation was to have an authorized share capital of Rs.20.00 crores to be subscribed by the National Cooperative Development & Warehousing Board as well as other institutions like banks, co-operative societies, insurance companies etc. A minimum dividend rate guaranteed by the Central Government was also suggested. It was also suggested that the debentures floated by the Corporation should also be guaranteed by the Central Government as to repayment of principal and the interest. iii. State Warehousing Companies The share capital contribution of State Warehousing Corporations not less than 50% should be subscribed by the All-India Warehousing Corporation and the rest by the State Government and there should not any other way of contribution to the share capital. The establishment of a State Warehousing Corporations in any particular State was to be effected as soon as the State Government agreed to pay its stipulated part of the share capital. Only two shareholders of these corporations were thus envisaged, namely, the All-India Warehousing Corporation and the State Government. The functions of the State Warehousing Corporations were similar to those recommended for the All-India Warehousing Corporation. The first state Warehousing Corporation was setup by Government of Bihar in the year 1956-57 and the last state Warehousing Corporation was setup in the year 1973 in Meghalaya. 3.2.6 Nucleus for setting up Warehousing Corporation The Rural Credit Survey Committee had inter-alia observed that there was already a network of civil supplies godowns throughout the country and as a first step, such godowns found suitable for the purpose should be taken

63 over from Government or from other owners by the National Co-operative Development & Warehousing Board and a coordinated plan worked out. The Committee further observed that it was also possible that the staff engaged for several years in the civil supplies departments of different States, be suitably made use by the All-India Warehousing Corporation, the State Warehousing Corporations, etc. at different levels of operation in view of long experience. Hence, the organization should start functioning even before the National Co-operative Development & Warehousing Board. The All-India Warehousing Corporation, etc. were statutorily established, the Committee also said and added that it did not consider that there was likely to be any great legal or administrative difficulty in building the nucleus of this organization and in taking over the civil supplies godowns i.e., such of them as were really suitable, in advance of the proposed legislation. It was assumed by the committee that before warehousing corporations were set up, State and Central Governments, particularly such of those as had very nearly wound up their Civil Supplies Departments. After de-control, would have taken steps to transfer storage spaces and some trained but retrenched staff to the warehousing corporation to enable the later to make a beginning for implementing the scheme. This was not done and the corporation was made to start from absolute scratch. These warehousing corporations were not provided with any assistance in the form of warehouses or business from Government or Public Sector Organizations. These were left to fend for themselves and compete with other organization. There has been a sea of changes in the level of agricultural and industrial produce and channels of marketing since the Central Warehousing Corporation was established with the main objectives of avoidance of distress sale of agricultural produce, creating proper storage facilities to prevent losses in storage and creation of an instrument of expansion of institutional credit. The Government had introduced various schemes to ameliorate the sufferings of the economically weaker sections of society. It is more involved now in price support and price control operations as also in

64 provision of easy credit to the farmers to ensure remunerative price for their produce. The massive price support operations which are carried out by various Government organizations are designed to avoid distress sale. These changes continue to have a direct bearing on the progress of public warehousing in the country. 3.2.7 Laws regulating Warehousing & Enactment of Warehousing Corporation Act There are various laws regulating the working of public warehouses in India and state warehouses act & rules is one of the oldest Act. Almost all the states have passed the laws to regulate warehousing business of certain commodities and the first such law was enacted in the year 1947.The State Warehouses Acts and Rules framed there under with a view to encourage the establishment of independent warehouses. It is obligatory for any person carrying on the business of warehousing to run according to the terms and condition of license. The State Warehouse Act and Rules also outline the obligation and duties of warehouseman and depositors. In the year 1956 the Agricultural Produce (Development and Warehousing) Corporation Act, 1956 was enacted by the Parliament.In the Act, the recommendation of the All- India Rural Credit Survey Committee were broadly incorporated. Finally the Warehousing Corporation Act passed in the year 1962. With a view to develop the warehousing sector in the country, the Government of India has introduced a negotiable warehouse receipt system in the country. Parliament has enacted the Warehousing (Development and Regulation) Act. 2007 (37 of 2007). The provisions of the Act has been made effective from 25th October, 2010. The Warehousing Development and Regulatory Authority has been setup by the Government from 26th October, 2010. The main objectives of the Warehousing (Development and Regulation) Act, 2007 are to make provisions for the development and regulation of warehouses, negotiability of warehouse receipts, establishment

65 of a Warehousing Development and Regulatory Authority (WDRA) and related matters. The Negotiable Warehouse Receipts (NWRs) issued by the warehouses registered under this Act will help farmers to seek loans from banks against NWRs to avoid distress sale of agricultural produce. Besides State Warehouses Acts and Rules, the following other Acts have bearing on the warehousing business; 1. The Indian Contract Act, 1872 2. The Sale of goods Act, 1930 3. The Prevention of Food Adulteration Act, 1954 4. The essential Commodities Act, 1955 5. The Custom Act, 1962 6. The Shops and Establishment s Acts of respective State Governments 7. The Industrial Dispute Act, 1947 8. The Fertilizer (Control) Order, 1957 9. The National Security Act, 1980 10. The Essential Services and Maintenance Act, 1981. 3.2.8 Public Sector Warehousing Agencies in India At the present, there are three main agencies in the public sector in India engaged in the field of building large-scale storage infrastructure and warehousing namely; i. Food Corporation of India (FCI), ii. Central Warehousing Corporation (CWC) and iii. State Warehousing Corporations (SWCs) The Food Corporation of India (FCI) is the main agency responsible for the execution of food related policies of the Central Government. The function of Food Corporation of India primarily relates to the procurement, storage, movement, transportation, distribution and sale of food grains on

66 behalf of the Central Government. It is also engaged in the handling, storage and distribution of sugar in North Eastern States and Jammu & Kashmir. The Government of India fixes the Minimum Support Price (MSP) and Central Issue Prices (CIP) of food grains distributed through the Public Distribution System (PDS). The FCI coordinates its functions through a country-wide network of offices with Headquarters at New Delhi and 5 Zonal Offices, 24 Regional Offices, 168 District Offices, and one Port Office at Kandla under its control. The capacity available with FCI is used mainly for storage of food grains as also certain other notified commodities. The total covered capacity available with FCI for storage of food grains including the capacity hired from CWC and SWCs was 288.36 lakhs MT as on 31.3.2010 The Central Warehousing Corporation is the premier warehousing agency at national level was established as a statutory body in New Delhi on 2nd March 1957. The authorized share capital of corporation is Rs. 100.00 crores. The issued and subscribed share capital of the Corporation is Rs.74.02 crore. The paid up share capital of the Corporation as on 31.3.2010 is Rs. 68.02 crore. The Central Warehousing Corporation provides safe and reliable scientific storage facilities and logistics services for various agricultural and industrial commodities. The total warehousing capacity in the hands of Central Warehousing Corporation as on 31.03.2010 is 105.98 lakh MT. The State Warehousing Corporations were set up in different States of the Indian Union with primary focus on district importance as in the area of operation. The share capital of the State Warehousing Corporations contributed equally by the concerned State Government and the Central Warehousing Corporation. The warehouses (CWC and SWCs) work under the respective Warehousing Acts passed by the Central and State Governments. The State Warehousing Corporation spreads throughout the country with the net work of 1595 units as on 31.03.2010. The aggregate operating capacity of the state warehousing corporations as on 31.03.2010 is 209.26 Lakhs Metric Tonnes throughout the country.

67 The total state wise warehousing capacities held by these three public sector undertakings are given table 3.1. Table-3.1 State Wise Storage Capacity available with different Storage Agencies in the Country as on 31.03.2010 (In lakh MT) State FCI CWC SWCs Grand Total Andhra Pradesh and A&N 38.18 15.04 20.32 73.54 Arunachal Pradesh 0.22-0.22 Assam 2.73 0.65 2.50 5.88 Bihar 6.72 1.26 2.57 10.55 Chhatisgarh 8.43 2.84 10.24 21.51 Delhi 3.67 1.51 5.18 Goa 0.15 0.41-0.56 Gujarat 6.80 7.65 1.53 15.98 Haryana 24.45 5.37 16.24 46.06 Himachal Pradesh 0.25 0.07 0.32 Jammu & Kashmir 1.31 - - 1.31 Jharkhand 1.19 0.35-1.54 Karnataka 8.37 7.11 10.44 25.92 Kerala 5.37 1.23 2.25 8.85 Madhya Pradesh 9.50 5.17 20.82 35.49 Maharashtra 19.98 16.64 12.48 49.10 Manipur 0.20-0.20 Meghalaya 0.26 0.14 0.40 Mizoram 0.23-0.23 Nagaland 0.34 0.13-0.47 Orissa 6.43 3.17 4.06 13.66 Philippines 0.80 0.80 Puducherry UT/Chandigarh 3.55 0.19-3.74 Punjab 73.73 6.95 57.00 137.68 Rajasthan 16.08 4.01 7.72 27.81 Sikkim 0.11 0.11 Tamil Nadu 9.70 6.31 6.47 22.48 Tripura 0.51 0.24-0.75 Uttar Pradesh 26.87 11.63 32.33 70.83 Uttra Khand 2.37 0.71 3.08 West Bengal 11.06 6.54 2.15 19.75 Grand total 288.36 105.98 209.26 603.60 Source: www.fin.min

68 The warehousing capacity of 105.98 lakh MT belongs to Central Warehousing Corporation includes 0.80 lakh MT capacities at Philippines. Hence virtual capacity of CWC in India is 105.18 lakh MT. The capacity of FCI includes 105.54 lakh MT capacity hired from CWC and SWCs. Hence virtual capacity of FCI is 182.82 lakh MT and the total warehousing capacity in India as on 31.03.2010 is 497.26 lakh MT. In order to have a better insight and indepth analysis on the subject, the total warehousing capacity held by these three undertakings, their trend for twelve years period commencing from 1998-99 with initial index as 100 presented at Table 3.2. Table - 3.2 Warehousing Capacity of three Major Public Sector undertakings in India (Capacity in Lakh MT) SI.No. Year FCI CWC SWCs Total Trend 1 1998-99 191.56 73.48 113.89 378.93 100.00 2 1999-00 254.08 74.79 123.74 452.61 119.44 3 2000-01 314.26 83.91 149.05 547.22 144.41 4 2001-02 279.01 89.17 185.49 553.67 146.11 5 2002-03 265.87 91.14 199.31 556.32 146.81 6 2003-04 236.65 94.16 199.85 530.66 140.04 7 2004-05 233.70 101.87 200.38 535.95 141.44 8 2005-06 255.56 100.38 197.05 552.99 145.93 9 2006-07 252.57 102.20 192.20 546.97 144.35 10 2007-08 238.94 98.78 187.32 525.04 138.56 11 2008-09 252.79 105.25 196.87 554.91 147.23 12 2009-10 288.36 105.98 209.26 603.60 159.29 Source: Annual Report of Ministry of Consumer Affairs and Public Distribution, Government of India

69 Capacity (in Lakh MT) - k K > S0 Ca) 0 4 oi o on o cn o cn D O O O O O O O 1998-1999- 2000-2001- 2002-2003- 2004-2005- 2006-2007- 2008-2009- 99 00 01 02 03 04 05 06 07 08 09 10 Year Fig. 3.1 : Warehousing Capacity of Three Major Public Sector Undertakings in India & their Trend The (Table-3.2) above indicates that the total warehousing capacity in India held by three major public sector undertakings as on 31.03.1999 is 378.93 lakh MT and Food Corporation of India holds the major share (50.55 % ) of the total capacity. The capacity held by Central Warehousing Corporation as on 31.03.1999 is 73.48 lakh MT while the capacity of CWC in the concluding year of the study is 105.18 lakh MT. The state warehousing corporations is the second major capacity holder among the three public sector undertakings. The capacity held with state warehousing corporations as on 31.03.1999 is 113.89 lakh MT and the capacity as on 31.03.2010 is 209.26 lakh MT. The total warehousing capacity held with the three public sector undertakings in the concluding year of the study stood at 603.60 lakh MT and after giving the effect of internal hiring the warehousing capacity as on 31.03.2010 stood at 497.26 lakh MT.

70 3.3 Central Warehousing Corporation 3.3.1 Incorporation Central Warehousing Corporation (CWC) was setup on 2nd March, 1957 after the enactment of Agricultural Produce (Development and Warehousing) Act, 1956, which was subsequently repealed and re-enacted by the Parliament as the Warehousing Corporations Act, 1962.The shares of the corporation were guaranteed by the Central Government as to the repayment of the principal and payment of annual dividend at a minimum rate to be fixed by the Central Government. It is the premier warehousing agency in India and is one of the biggest public warehouse operators in the country at National level. The corporation offers logistics services to a diverse group of clients and operating at 487 warehouses across the country with storage capacity of 105.98 lakh metric tones as on 31.03.2010. It provides warehousing services for a wide range of products ranging from agricultural produce to sophisticated industrial products. CWC is also an ISO 9001:2000, ISO 14001:2004 and OHSAS18001:2007 certified corporation. 3.3.2 Objectives The main objective of CWC is to provide scientific storage facilities for agricultural implements and produce and other notified commodities. The following are some of the important objectives; To meet the challenging needs of agriculture, trade, industry and other sectors by providing scientific warehousing, logistic services and related infrastructural facilities. To assist in the implementation of the Warehousing (Development & regulation) Act, 2007 with a view to expand credit through banking institutions against warehoused goods. Efficient Human Resources Management in order to enhance productivity and customers satisfaction.

71 To achieve global presence in the warehousing services and related logistics. To be a major player in the provision of pest control services. To reduce losses during warehousing, handling and distribution. 3.3.3 Function The primary function of CWC is to provide scientific storage facilities for agricultural implements and produce and other notified commodities. The following are the other functions of Central Warehousing Corporation; To acquire and build godowns and warehouses at suitable places in India or abroad; To run warehouses for the storage of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities offered by individuals, cooperative societies and other institutions. To arrange facilities for transport of agricultural produce, seeds, manures fertilizers, agricultural implements and notified commodities to and from warehouses. To subscribe to the share capital of State Warehousing Corporations. To act as an agent of the Government for the purposes of purchase, ale, storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities. To enter into with the previous approval of the Central Government, joint ventures with any Corporation established by or under any Central Act or any State Act or with any company formed and registered under the Companies Act, 1956 including foreign company or through its subsidiary companies, for carrying out its functions as enumerated in the Warehousing Corporations Act, 1962.

72 To establish subsidiary companies. To undertake disinfestations services outside its warehouses also in respect of agricultural produce or notified commodities. The corporation may, at its discretion, act as agent for the purpose of purchase, sale, storage and distribution of agricultural produce seeds, manures, fertilizers, agricultural implements and notified commodities on behalf of a company as defined in the Companies Act, 1956 (1 of1956) or a body corporate established by an Act of Parliament or of a State Legislature or a Cooperative Society. The corporation may, at its discretion, and at the request of the Central Government or any State Government or a Corporation established by or under a Central Provincial or State Act, or a Government Company as defined in section 617 of the Companies Act, 1956 (1 of 1956) or a Cooperative Society, prepare any project or render consultancy service for construction of warehouses or any matter connected therewith; The Corporation may operate warehouses, create infrastructure and arrange facilities for storage, handling and transport of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities, bonded cargo, air cargo, containerized cargo and liquid cargo. Further, the Corporation may also provide marketing or other warehousing related services in respect of agricultural produce or notified commodities; The Corporation may provide consultancy services, assistance, finance, programmes or projects related to agricultural produce or notified commodities and undertake any other activities considered incidental to its functions; and To carry out such other functions as may be prescribed. To educate the farmers on the preservation and its utilities;

73 3.3.4 Share Capital The authorized share capital of the Corporation is Rs. 100.00 Crore. The issued and subscribed share capital of the corporation is Rs.74.02 crore and the paid up share capital is Rs. 68.02 crore as on 31.3.2010.The capital has been contributed by Govt, of India, State Bank of India, 35 other Scheduled Banks, 721 Cooperative Societies, 7 Insurance Companies, 6 Recognized Associations/ Companies dealing in Agricultural Produces. The major share of capital has been contributed by Government of India which is 55.02 % of the total capital and State Bank of India contributes 21.67 % of the share capital while other schedule banks contributes 16.05 %. The capital contributed by 721 co-operative societies account for only 0.23 % to the total share capital. The capital Contribution is 7.02 % with respect to insurance companies. The least capital contribution has been made by Recognized Associations which accounts for 0.01 % only. The graphical presentation of share capital of CWC presented at Fig.3.1 CAPITAL CONTRIBUTION OF CWC AUTHORISED SHARE CAPITAL : RS.100.00 CRORE SUBSCRIBED SHARE CAPITAL : Rs. 74.02 CRORE PAID UP SHARE CAPITAL : RS. 68.02 CRORE 721 COOPERATIVE SOCIETIES 6 RECOGNISED ASSOCIATIONS & COMPANIES DEALING IN INSURANCE COMPANIES AGRICULTURAL PRODUCE OR ANY NOTIFIED COMMODITY OTHER SCHEDULED BANKS Fig :3.2 : Capital Contribution of CWC 3.3.5 Subsidiaries and Joint Ventures The Corporation has setup a fully owned subsidiary company in the name as Central Rail side Warehousing Company Ltd. (CRWC) on 10th July, 2007 with authorized share capital of Rs.150.00 crores.the Central Rail

74 side Warehousing Company Ltd. (CRWC) operating 14 rail side warehousing complexes (RWC s) with a total storage capacity of 2.33 lakh MT throughout the country. The Corporation also holds 50 % equity in 17 state warehousing corporations throughout the country. The Corporation also formed joint venture with the National Multi Commodity Exchange of India Limited (NMCE), the first demutualised electronic multi commodity exchange in the country,. 3.3.6 Management Central warehousing corporation is controlled by the Ministry of Consumer affairs, Food and Public Distribution. The Corporation operates with its network through out the country at three tiers level viz Corporate Office, Regional Offices and warehouses. The management of the affairs of the corporation vested with Board which is assisted by an executive committee and Managing Director. Section 20 of the Agricultural Produce (Development and Warehousing) Corporations Act., 1956 related to the management of Central Warehousing Corporation which was replaced by section 6 of the Warehousing Corporations at 1962. Section 6 (2) of the act provides, The Board of Directors shall act on business principles having regard to the public interest and shall be guided by such instruction on questions of policy may be assigned to them by Central Government. Section 6 (3) states, if any doubt arises as to whether a question is or is not a question of policy, the decision of the Central Government shall be final. The Board of Central Warehousing Corporation constituted with 14 Directors including Chairmen, Managing director and three functional directors. The detail composition of the Board of CWC and the organization structure presented below at Fig.3.3 and Fig.3.4

75 BOARD OF DIRECTORS Fig. 3.3 : Board of Directors of Central Warehousing Corporation

77 3.3.7 Operational Network of CWC Central Warehousing Corporation operates throughout the country and even abroad by its three tier operating system. The warehousing units directly controlled by regional offices and the corporate office located at New Delhi controls the functions of Regional offices located normally at State capital. Total number of warehousing units of central warehousing corporation as an 31.03.2010 is 487. The location of regional offices number of warehousing units under their jurisdiction presented below in Fig. 3.5. CHANDIGARH (27) DELHI (24) PANCHKULA (30) JAIPUR (32) LUCKNOW (45) PATNA (20) JL,. GUWAHATI (9) BHUBANESWAR (10) NAVI MUMBAI (5) HYDERABAD (52) BANGALORE (41) Fig. 3.5 Operational Network of CWC

78 3.3.8 Human Resources The success of any organization depends on the utilization and management of its resources. The resources are either in the form of man, machine, material or money. Among all these resources the most important resources is man which is having a bio-logical mind. The only resource which is having control over the operations performed by all other resources. The efficient manpower will always produce higher productivity and vice- versa. Thus, proper and efficient manpower of any organisation plays an important role in the productivity of the organisation. The corporation manages its activity with its skillful workforce, the detail of manpower for the period 1998-99 to 2009-10 has been tabulated in the under mentioned table. Table-3.3 Human Resources Analysis of Central Warehousing Corporation (in nos) SI.No. Year Cat-A Cat-B Cat-C Cat-D Total Trend 1 1998-99 309 1075 4036 3263 8683 100.00 2 1999-00 309 1098 4343 2926 8676 99.92 3 2000-01 315 1061 4323 2880 8579 98.80 4 2001-02 320 1153 4168 2814 8455 97.42 5 2002-03 329 1045 3455 1591 6420 73.94 6 2003-04 316 1137 3321 2039 6813 78.46 7 2004-05 304 1167 3239 1980 6690 77.05 8 2005-06 285 1138 3181 1809 6413 73.86 9 2006-07 261 1142 3070 1719 6192 71.31 10 2007-08 288 1095 3105 1571 6059 69.78 11 2008-09 278 1035 3104 1518 5935 68.35 12 2009-10 265 1057 2995 1448 5765 66.05 Source: Annual Reports of CWC

79 From the analysis (Table 3.3) depicts that the total man power as on 31.03.1999 was 8683 while the total manpower in the concluding year of study stood at 5765. The above table indicates 33.95 percentage reduction in the manpower as on 31.03.2010 as compared to the manpower as on 31.03.1999. 3.3.9 Corporate Governance The Warehousing Corporation Act 1962 describes the composition of Board of Director. The Board has mixed of official and independent Directors. The Board comprises of a part time Chairman, Managing Director, Three Functional Directors, Six part time Directors appointed by the Department of Food and Public Distribution, Ministry of Consumer affairs, Food and Public Distribution, Government of India and three Directors elected by the respective class of share holders. The corporation is a Government of India undertaking in which the Managing Director and three functional Directors are appointed by the Department of Food and Public Distribution Ministry of Consumer Affairs, Food and Public Distribution, Government of India on their pay scales and perquisites. The Managing Director and Functional Directors are appointed for a period of five years or till the date of their superannuation or until further order which ever is earlier and official part time independent Directors are appointed by the Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution, Government of India or elected by the respective class of share holders(co-operative and Insurance Companies, Other scheduled Banks) for a period of three years. The meeting of the Board are generally held at least once in a quarter at the Corporate Office of the Corporation and scheduled well in advance. The meetings of the Board are governed by a structure agenda and any member of the Board is free to recommend inclusion of any subject matter in the agenda for deliberations. Detail agenda papers are circulated in advance to facilitate the Board to take independent decisions.

80 3.3.10 Corporate Social Responsibility The Corporation with a great responsibility and sensitivity to Corporate Social Responsibility (CSR) had joined the Global Compact Programme (GCP) of the United Nations during 2001. The focus of the GCP is for internalizing the 10 principles of human rights, labour standards, environment and anti corruption in the functional areas. With the joining in GCP, these core values have been institutionalized with the organization. The Corporation is also one of the founder members of the Global Compact Network (GCN), New Delhi. The networks primary focus is furtherance of the idea of the UNGC initiative in India. As a responsible corporate citizen the Corporation has been undertaking a number of activities under its Corporate Social Responsibility scheme. During the concluding year of the study the various activities were undertaken in the areas of training and education, community development, health and sanitation promotion of culture, sports, etc. involving a total expenditure Rs.117.70 lakh. This includes and amount of Rs.8.75 lakhs spent towards training of farmers on post harvest loss minimization and safe storage of grain at farm level. 3.3.11 Quality Management System The Corporation being pioneer in the field of warehousing has successfully implemented and maintained the ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:2007 certification since 1999.There are 376 units certified under ISO 9001:2000 while 365 unit have been certified for ISO 14001:2004 as on 31.03.2010. Further, 176 number of units certified under OHSAS 18001:2007 as on 31.03.2010. The Corporation is having its quality policy which is the commitment of Chief Executive Officer. The Corporation is also having its quality objectives and system devised to attain the said objectives.

81 3.3.12 Functional Activities In the previous chapter, it was analysed and found that the corporation is the one of the largest / warehouse operator in the country with national importance. It was set-up with the primary objective for providing warehousing services. Besides warehousing, the Corporation also carrying out other ancillary activities such as market facilitation, pest-control services, Farmer Extension Services Scheme and Consultancy. The functional activities are analysed in detail as under; i. Warehousing The core activity of Central Warehousing Corporation is to provide scientific storage facilities for agricultural implements and produce and other notified commodities. CWC, as a bailee of the stock stored at its warehouses, is responsible to assure its clients for Quantity and Quantity (Q & Q) of stocks stored at its warehouses. For ensuring safe and scientific storage, the corporation has evolved CODE OF STORAGE PRACTICES for more than 200 different types of commodities including agricultural produce, industrial chemicals and other notified commodities. The trained technical staff of the corporation takes proper care of the stock by undertaking prophylactic and curative treatment making the Quality control services provided by CWC of the highest standard in the country. Besides, general warehousing, the corporation is also operating 99 Custom Bonded Warehouses with 7 Lakhs Metric tonne capacity in the state of such as Andhra Pradesh, Delhi, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal. The concept of Custom Bonded Warehousing has been promoted with a view to facilitate deferred payment of custom duty to encourage entrepreneurs and export oriented units to carry out their operations with least investment. These bonded warehouses are located all over the country at places well-connected with the port towns for smooth movement of goods to and from the discharge points.

82 The corporation had envisaged the problems in the movement of imported and exportable goods to and from the port towns and transcended the hurdles by developing an extensive infrastructure of container freight stations, inland clearance depots & buffer container yards throughout the country. Presently, CWC offers import and export warehousing facilities at its 34 CFS/ICD/BCY in ports and inland stations at Ahmedabad, Aurangabad, Bangalore, Baroda, Chennai, Coimbatore, Delhi, Grater Noida, Haldia, Hyderabad, Kandla, Kanpur, Kolkata, Kota, Manglore, Mumbai, Nasik, Navi Mumbai, Paradeep, Pune, Rajkot, Saharanpur, Toothukudi, Udaipur, Vapi, Varanasi, Verna & Vishakapatnam, where composite services for containerized movement of import/export cargo are provided. The Corporation over the years has also brought out ambitious expansion in the operation of air cargo complexes, which is a major step towards providing complete services as a multi-modal transport operator. Presently, CWC is operating 3 air cargo complexes at the international airports of Amritsar, Goa and Singllur besides managing the accompanied/mishandled cargo warehouse at Indira Gandhi International Airport, New Delhi. The Corporation is also running air-conditioned godowns at Calcutta, Bombay and Delhi, and provides cold storage facilities at Hyderabad. Special storage facilities have been provided by the Central Warehousing Corporation for the preservation of hygroscopic and fragile commodities. Besides, warehousing CWC also offers the services of rail transport of containers by running train between Gate-way ports such as from Delhi to JNPT, Mundra and vice-versa. ii. Market Facilitation The corporation in a big way helps the physical distribution, warehousing and marketing of goods by arranging the facilities of transport of agricultural produce, seeds, manures, fertilizers and other notified commodities. The storage charges fixed by the corporation do not include any element of handling of the goods. The depositors availing the facility of

83 storage at the warehouses of Central Warehousing Corporation require the services handling and transportation of their stocks. Besides storage, the corporation also offers market facilitation services to its valuable customers in the area of port, clearing & forwarding, and handling & transportation inside the warehouse complex and also outside the warehouse complex. The market facilitation and handling & transportation services include the operations like loading, unloading and transportation of commodities etc. The Corporation in consideration charge supervision charges for the services rendered. It is the second important area of revenue contribution. iii. Pest Control Service The Corporation took up disinfestations Services as an ancillary activity out of its premises to facilitate proper maintenance of stocks at the client locations. Over the years, this area has expanded vastly thereby establishing CWC as a major pest control operator providing pest control services in health and hygiene, anti-termite treatment, grain preservation including ship, aircraft and container fumigation, thus earning it the title of National Pest Control Agency. CWC has earned a major breakthrough in disinfestations of aircrafts of Air India with methyl bromide fumigation using timer device. The Corporation rendering state-of-threat pest control services to a varied group of clients both private and public with the aim to prevent the economic and health loss caused by pests, rodents and termites by using ISI marked / WHO approved / eco-friendly pesticides. The corporation has obtained accreditation of its officers under International Standard for Phyto- Sanitary Measures (ISPM -15) and Australian Fumigation Accreditation Scheme (AFAS) - India Programme of AQIS Standards. The corporation undertakes quarantine fumigation of cargo and fumigation of export containers / shipments with MBr/Alp as per need of customers. CWC has primarily focused on pre-shipment fumigation of export cargo as well as on board (ship) fumigation of containerized cargo. The corporation is now also offering ship fumigation services with port of discharge guarantee assuring freedom from live insect infestation at the port of discharge. The Corporation

84 also undertakes disinfestations of rail coaches, aircrafts, airport premises etc. iv. Farmers Extension Service Scheme The Farmers Extension Service Scheme was launched by CWC in the year 1978-79.The following are the main objectives of the scheme: - To educate farmers about the benefit of scientific storage and use of public warehouses. To impart training to the farmers on the techniques of scientific storage & preservation of food grains. To demonstrate spraying and fumigation methods to control insects. To assist farmers in getting loans from the banks against pledge of Warehouse Receipt. v. Consultancy The Corporation acts as leader in the field of warehousing and scientific storage. Being pioneer in the field of warehousing and versatile expertise it provides consultancy services in the area of preparation of project report, construction of warehouses on deposit work basis. In consideration, the Corporation earns supervision charges for the services rendered. The corporation not only earns revenue by rendering the services of consultancy but also helps a lot in creating storage infrastructure for the country as a whole. 3.4 Summary Indian history is full of references to foodgrains storehouses; the Cholas, Nayaks and Mahrattas had them. At Panhala in Maharashtra, there is the large grain storage structure built by Chhattrapatti Shivaji. In Tamil Nadu in the Palace at Thanjavur there is one and another at Tiruvaiyur nearby. Some foreign visitors who had a look at these compared them to the modern silos. The establishment of licensed warehouses in India was first recommended by the Royal Commission on Agriculture in 1928. The

85 importance of warehousing was felt seriously and the Reserve Bank of India in the year 1944 urged all the State Governments by issuing directions to enact legislation for setting up of warehouses in their concerned States. In 1949, the Rural Banking Enquiry Committee was appointed by the Government of India. Among its terms of reference, the Committee was to consider measures that could be adopted for the extension of banking facilities in rural areas. The Committee recommended that Provincial Governments should consider the desirability of advancing long-term loans at concessional rates of interest to cooperative societies to build godowns in centers which provided good markets. In an enquiry conducted by the Reserve Bank of India in 1952, information was collected by means of a questionnaire as to the state of existing godowns and their suitability for conversion into licensed warehouses. The replies indicated that some of the Government godowns could be readily converted into regular warehouse so far as the technical quality of the accommodation was concerned. The public sector warehousing was developed in India with the twin objectives of storing the agriculture produce and other notified commodities in a scientific manner with pest free condition and preventing the farmers from distress sell of their hard raised crop Presently, there are three major public sector undertakings playing crucial role in the field of warehousing in the three tier system of warehousing which was recommended in the Rural Banking Enquiry Committee (1954). Public warehousing, as we know it today, stems from the recommendations of the Committee of Direction of the All-India Rural Credit Survey Committee. It would, therefore, be appropriate to go into some details of the reasons which led that Committee to formulate its recommendations regarding the establishment of Warehousing Corporation. The beginning of public Warehousing in India got recognized with the enactment of agricultural produce (Development & Warehousing) Corporation Act. The Act categorically states the setting up of public sector warehousing agencies at all India level (CWC) and state level (SWCs).

86 At the present, there are three main agencies in the public sector in India engaged in the field of building large-scale storage infrastructure and warehousing capacity namely; i) Food Corporation of India (FCI), ii) Central Warehousing Corporation (CWC) and iii) State Warehousing Corporations (SWCs operating with a capacity of 603.60 lakh MT as on 31.03.2010. The Food Corporation of India (FCI) is the main agency responsible for the execution of food related policies of the Central Government. The function of Food Corporation of India primarily relates to the procurement, storage, movement, transportation, distribution and sale of food grains on behalf of the Central Government. It is also engaged in the handling, storage and distribution of sugar in North Eastern States and Jammu & Kashmir. Central Warehousing Corporation (CWC) was setup on 2nd March, 1957 after the enactment of Agricultural Produce (Development and Warehousing) Act, 1956, which was subsequently repealed and re-enacted by the Parliament as the Warehousing Corporations Act, 1962.The main objective of the CWC is to provide scientific storage facilities for agricultural implements and produce and other notified commodities. The Central Warehousing Corporation is the warehousing agency at all India level and it is managed with a board having 14 Directors with authorized share capital of Rs.100 crores and paid-up capital of Rs.68.02 crores. The Corporation was started it operation with 7 nos of warehouses in the year 1957 and reached with 487 warehouses as an 31.03.2010. The Central Warehousing Corporation has to carry out the function of acquiring and building warehouses, storage and preservation of agriculture and other notified commodities, subscribe to the share capital of State Warehousing Corporation, rendering disinfestations services besides training to farmer and other ancillary functions. The State Warehousing Corporations were set up in different States of the Indian Union with primary focus on district importance as in the area of operation. The state warehousing corporations operate through out the countries with its network of 1595 warehouses with total capacity of 209.26 lakhs MT as on 31.3.2010.