Scope & Functions

THE SCOPE AND FUNCTIONS OF THE STATE WAREHOUSING CORPORATIONS

 

1.    Aspects of lack of holding power

 

For ages Indian Agriculture has been in moral darkness and bemused by the lack of holding power of the ordinary cultivators and common agriculturists. One of the main aspects of this shortcoming is abject dependence on the rural moneylenders. This has compelled the attention of the Government. The power which stands in the way of India’s economic development is the power of evil financing – the want of rural banking system for the people. The land lies devastated by the shadow of the middleman (mahajan). India stands a thousand years behind the times because the middleman with his ruinous rates of interest stands obliquely the path of progress.

 

2.    SALE AT DEPRESSED PRICES

 

The second aspect of the lack of holding power is quite independent of the prowl of the moneylenders. The cultivators does not have bare means of sustenance and often struggles even for them. They do not have the capacity to hold on their harvest to sustain the peaks and valleys of prices so as to await a most profitable chance for their marketable surplus. He finds his produce grabbed by traders, merchants and middlemen at prices dictated by them. For another, he does not have facilities for preserving the harvest in his house or in the village safe against pilferers, rodents, and ravages of nature. Some of those who can afford to wait do resort to traditional but crude way of preservation and it is no wonder that the consequential annual loss in food grains alone has been estimated to such as could have fed the entire population of India for a full fortnight. Again there was the wastage in the course of taking the produce from one prospective buyer to another. In short the cultivator was cruelly handicapped in his effort to create time utility, place utility and possession utility for his products and by his weak bargaining power. For this he needed help. Experts on Agriculture Marketing says “to conserve temporary surpluses, adjust unevenly produced commodities to human needs, assist in stabilising prices and reduce the requirement for marketing or processing facilities by permitting their more even use throughout the year”. The expert Committee on the review of the Bombay Agricultural Produce Markets Act has put it coherently this way “Storage facilities can be broadly grouped under two heads. When goods cannot be sold or arrive in quantities larger than what the market can digest, it would be necessary to temporarily store the goods pending their disposal. Storage accommodation should also be necessary when the prices fall owing to various reasons to uneconomic levels so as to provide the time lag for adjustment of supply and demand.”

 

  1. REMEDY FOR MALICE

 

As pointed out earlier, this malice could not but be taken notice of by innumerable Committees and Commissions. In the post war period, particularly after 1947, the problem – the first and most cardinal in the way of a welfare state – assumed great urgency. Both the Agriculture Finance Sub Committee (1945) and the Rural Banking Enquiry Committee (1950) emphasised the importance of warehousing in relation to rural credit and rural banking. The Agriculture Finance Sub Committee recommended that the state should itself undertake as a part of its programme of development of rural transport, the planning and construction of warehouses at all nuclear points of trade in agriculture produce. “The warehouse system should be operated by public corporation organised on lines similar to those of Improvement Trust or Port Trust.” Recognising the al India character of the problem as well as the need for State Finance and State subsidies in tackling it, the later Committee suggested the formation of Warehousing Development Board with a large capital for the purpose of giving loans and subsidies to those who were prepared to take up this line of activity as business.

 

4.    Integrated scheme for cooperative credit

 

But the All India Rural Credit Survey Committee Report gave the first detailed scheme whereby execution and implementation could be secured. The report observed that agricultural credit was neither sufficient, or of the right type and failed to go to the right people. The basis of future policy laid down by this Committee was the creation of condition in which cooperative credit would have reasonable chances of success. For this purpose it recommended the setting up of an integrated structure based on three fundamental principles:

 

                  I.    State level partnership at different levels,

                II.    Full coordination between credit and other economic activities especially marketing, processing and warehousing, and

               III.    Administration through adequately trained and efficient personnel responsive to the needs of rural population.

The Reserve Bank was assigned with a crucial role in this scheme of integrated credit. As a result, for the first time in our country, a link has been created between the unorganised money market and the organised money market.

 

5.    Need for concerted effort

 

Acknowledging the magnitude and urgency of the problem connected with “one of the gravest economic handicaps” of the cultivator, the Survey Report concludes that the effort called for in its solution has to be both concrete and countrywide. “In these two aspects, namely the area to be covered and the coordination to be effected, the direction and endeavour required might well be compared to those which have gone into the construction of the railway system of India or the laying out of its roadways.” Accepting the suggestion of the Survey, the Government of India established a National Co – operative Development and Warehousing Board to plan and promote programmes for the production, processing, marketing, storage, warehousing, export and import of agriculture produce through a co – operative society or warehousing corporation. It was to receive for the Central Government a non – recurring grant of five crores of rupees and a recurring grant in each year of a sum of five crores of rupees for five years after the commencement of the Agricultural Produce (Development and Warehousing) Corporation Act, 1956. Out of this, the Board maintains two funds – the National Co – operative Development Fund and the National Warehousing development Fund.

 

6.    Warehousing Corporation

 

Under this board came into being the Central and State Warehousing Corporations. The Authorised capital of the Central Warehousing Corporation was 20 crores of rupees divided into 200000 shares of Rs.1000 each. The State Bank, other Scheduled banks, Insurance Companies, Investment Trusts and other classes of financial institutions, co – operative societies and recognised associations ad joint stock companies dealing in agriculture produce have been allocated their quota of shares. The shares are guaranteed by the Central Government as to the repayment of the principal and payment of the annual dividend.

 

  1. FUNCTION OF THE CORPORATIONS

 

Similarly, the State Warehousing Corporations were set up with an authorised capital of two crores, their general superintendence and management vested in a Board of Directors consisting of five directors nominated by the Central warehousing Corporation, five nominated by State Government and a Managing Director. The functions of the Corporation derived form section 34 of the Act are to: 

 

a)    Acquire and build godown and warehouses at such places within the State as it may, in consultation with the Central Warehousing Corporation, determine;

 

b)    Run warehouses in the state for the storage of agricultural produce, seeds, manures, fertilisers and agricultural implements;

 

c)    Subscribes to the share capital of cooperative societies engaged in the storage or warehousing if agriculture produce;

 

d)    Arrange facilities fro the transport of agricultural produce to and from warehouses;

 

e)    Act as an agent of the Government for the purchase, sale, storage, and distribution, of agriculture produce, seeds, manures, fertilizers, and agricultural implements.

In addition, a Warehousing Corporation may, n consultation with Reserve Bank of India, issue and sell bonds and debentures carrying interest for raising funds.

 

  1. LIMITATIONS ON ATONOMY

 

In discharging these functions, the Corporation is autonomous subject to the following limitations:

 

a)    The Corporation is bound by the directives that may be issued by the Government and Central Warehousing Corporation form time to time on questions of policy; the Corporation, however, has a right to differ on what is or is not a question of policy and such difference will finally arbitrated by the Government of India. The Corporation will guard against its being relegated to the role of an appendage or department of the Government, thereby frustrating the intentions of the farmers or the Act.

 

b)    Estimates in the Budget require the approval of both the Central Warehousing Corporation and the State Government. The assumption behind the principle of autonomy is that the Corporation will devise its own instruments ad compute its own costs without interference with its estimates, except when there is squandering of resources or evidence of mismanagement. The corporation will expect from the scrutiny by the Central warehousing Corporation and the State Government for the Estimates, advice and suggestions to which the Corporation will give its utmost defence. A second assumption is that in case of delay in receipt of approval, the activities of the Corporation may proceeds apace as envisaged, in anticipation on of approval.

 

c)    The Government may require the Corporation to submit such reports and returns as may be prescribed from time to time. The permission of the Government is necessary, were the Corporation to take upon itself functions in addition to those enumerated in section 34 of the Act.

 

d)    The Balance - Sheet and the audit report will have to be I n the hand s of the Central Warehousing Corporation on and the State Government within three months of the close of the financial year.

 

e)    Selection of Centre for construction for construction by the Corporation of its own buildings requires consultation with the Central Warehousing Corporation.

 

f)     Issue of new shares is again subject to consultation with the Central Warehousing Corporation and the sanction of the state Government

 

g)    The appointment of the Managing Director is out of the decision making power of the Board of Directors.

 

  1. Perspective behind the working

 

The perspective that should inform the working of the Corporation can best be summed up in the Survey Committee’s own words:

“ Along with storage and warehousing could go the distribution of certain essential goods, which the cultivator requires as producer and as consumer. In other words, through the organisation in charge of storage and warehousing, and on an agency basis, could be distributed fertilizers, seeds and so on, as well as kerosene an other basic requirements of t he villager. Organised in this manner through an all India Warehousing Corporation, State Warehousing Corporation managed warehouses and godowns (including seed storages etc., run by marketing societies or by purchase and sale societies) – the function of distribution alone, even if we ignore the rest fro the moment, will be seen to have tremendous potentialities. Experience hitherto, fro example with the numerous other items which have to be effectively channelled t o he cultivator under the grow – more – food scheme – such as improved seed, agricultural implements and so on as India wide agency, which supplements, supports the village and builds up the cooperative agencies as the final nexus with the village will fulfil a wide felt need of organisation. At the cooperative end, by working in close cons\junction with credit societies, the organisation can help to provide credit in kind (instead of in cash) to he maximum possible extent, a most important consideration in view of the extent of misuse of credit when it is in the form of cash. An organised system of warehousing and storage, together with trained personal which goes with it, can also provide as very important part of the solution, should such at any time be required, for a problem of either price control on the one hand or of price support on the other in regard to agricultural commodities. Hence the great importance from many points of view of pursuing such a programme with the greatest determination possible and all the finance needed together which the most careful preliminary planning.

 

10.  Encourage the storage of farm produce

 

To sum up: Encourage the storage of farm produce in order to spread marketing’s over a longer period and avoid extensive selling at harvest time when market supplies are heaviest; open new sources of credit; provide maximum protection against loss from storage.

 

  1. Corporation’s judgement of policy

 

Thus this statutory corporation has been willed by the elected representatives of t he people to concentrate on the needs and targets in the defined sector of nation building actively by means of a self contained, compact administrative machine in the interests of expedition and initiative. Such being the case, to judge what is right or wrong, proper or improper, necessary or unnecessary inheres in the Corporation itself, and it is desirable that there is little trammelling of that judgement. It is difficult to define what a policy is and t hisvery difficulty may inhibit interference. It is safe rule for t he Government and the Corporation to consult each other before a directive is issued by t he former. In case of difference or doubt it may be advisable hold back the directive so as to seek the guidance of the Central Development and Warehousing board.

 

  1. Criteria for issue of directive

 

It is fair to attempt to indicate, in general terms what t he Corporation is likely to consider as a policy. A matter, for inclusion in the directive as one of policy, will satisfy the following criteria:

 

a)    It is a public good for which the Corporation, in the discharge of its functions, has no plans or scheme and which will not ordinarily be undertaken by the Corporation except under a directive;

 

b)    It is a public good envisaged by the Corporation but the fulfilment of which will involve the domains of the Government and other agencies;

c)    It is an action, which in the reasoned and re corded opinion of the Government has political or administrative bearing for which the government may ultimately be held liable, accountable, or responsible.

 

d)    It is the action, which exceeds the periphery of the Budget and Regulations previously approved by the government, or which arises out of any representation or recommendation that Accountant General makes t o the government.

 

e)    It is a project, which, without such a directive, may end in misuse of funds or authority.

 

13.  QUESTION OF POLICY

 

The following cannot be a question of policy:

 

a)    Internal Administrative procedures, other than those specifically governed by regulations:

 

b)    Staff requirements, appointments, confirmations, promotions and disciplinary actions;

 

c)    Any one interpretations of a section of the Act or a Regulation where more than one equally valid interpretations are possible;

 

d)    The order and timing of the implementations of the different schemes falling within the statutory functions and resolved upon by the Board of Direct ors from time to time.

 

14.  Warehouse Receipt

 

The pivotal role in the whole business is that of the Warehouse Receipt. As soon as a cultivator deposit his produce in the warehouse of the Corporation in any of its field centres, he is entitled to a Warehouse Receipt containing details with regard to stocks, their grading and value. The cultivator takes the Receipt to the nearest branch of the State Bank of India or of any commercial bank and gets quick credit facilities against it. In order to p remote greater use of the facilities provided by warehouses fro storage or produce etc., and notifying that the advances against warehouse receipts issued by the Central and State Warehousing Corporation would be exempt from the Bank’s directive in respect of advances against food grains. The Warehouse Receipt, at present, is of limited negotiability – all the same, it helps in the disposal of stock without physically handling, by just handing over receipt to the transferee.

 

15.  Stocks indemnified against loss

 

The stocks in the Warehouses are insured or otherwise indemnified against loss and preserved at moderate storage charges.

 

16.  IDEA SLOW TO CATCH

 

The Bihar State Warehousing Corporation has constructed 1.10 LakhMT capacity godowns. The BSWC’s target for the X Th Financial Year plan is to provide approximately 2.0 Lacs MT godown additional capacity for scientific storage of food grains. The Bihar State Warehousing Corporation was established in March 1957 and it was one of the first warehousing corporations in the series of establishment of other State Warehousing Corporations. Plans for Establishment of Container Freight Station at Fatuha, construction of warehouses under the Railway Freight Provider Scheme besides construction of general godowns are under way. The idea has not yet caught on among the agriculturists, as it ought to. However, the fertiliser manufacturing companies and Public Sector Cooperative Units is extensively using it for the purpose of fertiliser storage and distribution. Even in the advanced countries like United States of America the experts feel that notwithstanding the obvious benefits derived from storage operations by both farmers and consumers the later group have been consistently antagonistic to the idea. It also bewails the public general misunderstanding of the service of storage. As an instrument of rural credit and scientific preservation of deposits of agriculture produce, the Corporation can go a long way to remove basic worries of the village peasants. The Corporation is doing its level best to sell the idea to the people will invaluable.

 

17.  UNSATISFACTORY FEATURES

 

The experiment is without precedent and in the early stage alarums, ambiguities and doubts combined with a certain measures or apathy and nose – tilting are natural. There are certain features, which are not satisfactory.

 

 

a)    The obtaining of credit facilities against Warehouse Receipt can be quicker. Every effort is being made to iron out discordances and cooperation form the Nationalised and Commercial Bank is forth coming generously. Even so, want of branches or at least pay officers close to rural areas is likely to prove a deterrent for poor cultivators, but establishment of a network of banking institutions in the micro interiors will circumvent this difficulty with effective and constructive monitoring.

 

b)    Pending the gathering of momentum by movement, we have to make – do with temporarily hired accommodation where scientific storage and laboratories for grading and quality control are not possible. This will be remedied when corporation start constructing adequate field centres and warehouses. As it is, each warehouses is in charge of a trained warehouseman on whose qualities, qualifications and experience more than on mere construction of standard scientific godowns and standardisation of agriculture produce dose the success of warehousing depend. He is cut out for the role of friend of peasants, a supplier of market information on the best prices and best places obtain them and an agent for scientific preservation eliminating malpractices and unauthorised imposition during weighment and disposal.

 

c)    The Corporation do not as yet undertake transport of produce from the actual centres of harvest. When traders and merchants lie in wait at the door or cultivators with their own transport, it is too much to expect that the cultivator will forgo this facility and quick money at the door step and proceed to a Corporation Warehouse .The possible answer to this is that at some stage the Corporation will have to undertake this essential function itself as in advanced countries like United States of America, Canada   and Australia etc., as also proposed by the Report of the Steering Committee on INTRODUCTION OF MODERN TECHNOLOGY IN HANDLING AND TRANSPORTAION OF FOOD GRAINS, Government of India, Ministry of Food and Consumer Affairs, Department of Food and Civil Supplies.

 

d)    It is seen that the primary purpose of attracting the actual producers particularly those with smaller scale of agricultural operations has not been served in the initial stages. There is far larger number of traders, merchants, and middleman as constituents of the Corporation. In other words, easy credit goes to those who do not need or deserve it and who, perhaps, are themselves moneylenders. It is here that an intense campaign of education is called for. While we will take what custom we are able to lay our hands on as a business concerns, we would prefer to reach the actual producers.

 

e)    There is a difficulty peculiar to Bihar. We do not have the system of Regulated Markets nor Warehousing Acts as Madhya Pradesh, Maharastra, Chennai, Andhra Pradesh, and many other States have for years been having. The business of the Corporation in those States has been attended with great success as its activities were closely linked with the Regulated Market already in operation under efficient Market Committees. Long ago Royal Commission on Agriculture had spoken of them: “Well – regulated markets create in the mind of the cultivator a feeling of confidence and of receiving a fair – play and this is the mood in which he is most ready to accept the new ideas and to strive to improve his agricultural practices. Unless the cultivator can be certain of securing adequate value for the quality and purity of his produce, the effort required for an improvement in these will not be forthcoming. The establishment of properly regulated market should act as a powerful agent in bringing about a reform which is much needed primarily in the interest of the cultivator and secondarily in that of those engaged in trade and commerce of India.” It also thought that the “possibilities offered by regulated markets for the extension of the banking business generally will no doubt receive due attention for the joint stock banking companies.” Legislation has now been enacted in Bihar as well of which the broad features are:

                      I.    Clear definition of market charges, reduction of excessive charges and prohibition of unauthorised addition to them;

                    II.    Regulation of market practices;

                   III.    Licensing of market functionaries including buyers, brokers and weighmen;

                  IV.    Use of standard weight and measures only;

                    V.    Arrangements for settlement of disputes regarding quality, weighment and deductions etc;

                  VI.    Sale by open auction or open agreements;

                 VII.    Appointment of Market Committee fully representative of growers, traders, local authorities an government;

                VIII.    Agreement for display of reliable and up – to – date market information in the market yard, and

                  IX.    Control by Government over the market and Market Committees.

Legislation to make the Warehouse Receipt a negotiable instrument (In a limited sense) has also been enacted.

 

18. EMBODIMENT TO AGRICULTURAL ECONOMY

 

Thus it is found that the progress in Warehouse business is bound with all manner of fascinating investigations. There is, for instance, the need for reconciliation of the roles of Agriculture Marketing Cooperatives and the Corporation in the respective States. It would be evident that Warehousing is not mere storage. It is one process in the chain boding ill or well to agricultural economy according to the way we carry out programme inn the spirit in which it was conceived. The Managing Directors of the Central and State Warehousing Corporations, representative of the Reserve Bank, State Bank, and other Scheduled Banks, Secretaries to Central and State Ministries of Agriculture ad Co – operation and Registrars of Co – operative Societies confer frequently to resolve new doubts and ally new fears. It is appreciation of all the factors and features mentioned above that are most likely to inject pep into the activities of the Corporation in this State.

 

19. CREED OF THE CORPORATION

 

a)    The creed of the Corporation can best be based on the credo of a well – known firm: -

b)    “We believe our first responsibility is to our customers and depositors. Our services must always be good and we must strive to make them better at lower costs. Our orders must be promptly and accurately attended to. Our dealers must make a fair profit.”

 

c)    “Our second responsibility is to those who work with us – the men and women in our warehouses and offices. They must have a sense of security in their jobs. Conditions of service must be fair and adequate, management just, surroundings neat and orderly. Employees should enjoy scope for suggestions and complaints. Warehousemen and departmental heads must be qualified and fair-minded. For those qualified, there must be considered an individual standing on his own dignity and merit. Repetitive manual work must be minimised.”

 

d)    “Our third responsibility is our management. Our executives must be persons of talent, dedication, experience, and ability. They must be persons of common senses and full understanding.”

 

e)    “Our fourth responsibility is to the general public. We must maintain in good order the property we are privileged to use. We must acquaint the community with our activities.”

 

f)     “Our fifth and last responsibility is to our share – holders. Business must make a sound profit. Reserve must be created, research must be carried on, adventurous programmes developed and mistakes made and paid for. Bad times must be borne and provided for, new schemes launched, new plans devised, new field centres opened, new warehouses built. We must experiment with new ideas. When these things have been done, the shareholder should receive a fair ret urn. We are determined, with the help of God’s grace, to fulfil these obligations to the best of our ability.”

 

20. Things that need to be done and views that need to be defined consequent on that determination  have been dealt with in the ensuring chapters.