National Bank for Agriculture and Rural Development (NABARD) and Origo Commodities has entered into a Memorandum of Understanding (MoU) to support farmers in Andhra Pradesh and Telangana to realize better pricing for their harvest by pledging their produce under Negotiable Warehouse Receipt financing. Origo Commodities is a collateral management company, which allows farmers to make deposits of their produce in its warehouses and obtain pledge financing. In a similar initiative last year, small and marginal farmers were able to realize 20% to 30% higher price in Telangana. This year, NABARD and Origo Commodities aim to benefit more farmers in both states.
Warehouse receipt financing is a key tool for monetizing the produce without actually selling the commodity at the time of harvest by the farmers to meet their financial requirements. In case of Negotiable Warehouse Receipt financing, the farmer is allowed to make a deposit of their harvested crop at a warehouse closest to his farm and obtain pledge financing from banks to the extent of 70-75% of the value of the commodity. This scheme enables the farmer to obtain a bridge loan at low interest rates allowing him to avoid a “Distress Sale” at the time of harvest and wait to sell the produce when the price is right.
This joint initiative between NABARD and Origo Commodities will enable farmers to use the warehousing infrastructure of Primary Agriculture Co-operative Societies (PACS) and also more than 100 warehouses managed by Origo Commodities across the state of Andhra Pradesh and Telangana. In Andhra Pradesh alone, the initiative will be extended to five districts - West Godavari, Krishna, Kurnool, Guntur and East Godavari in the upcoming harvest season.
Speaking about the initiative, Mr. Jiji Mammen, Chief General Manager, Andhra Pradesh and Telangana Regional Office, NABARD, said, “This MoU is going to help farmers to a great extent by realizing the right price by offering them options to sell their produce at the right time. The initiative also focuses on Warehousing Development and Regulatory Authority (WDRA) accreditation so that farmers can benefit from post-harvest loans at 7% p.a. with interest subvention. We are hopeful that small and marginal farmers who are members of Primary Agricultural Cooperative Societies (PACS), will participate in this initiative and we will put all efforts along with Origo Commodities to make it a success.”
Commenting on the tie-up, Mr. Sunoor Kaul, Director, Origo Commodities said, “The initiative will yield significant benefits for farmers in Telangana and Andhra Pradesh. The key to success will be to make rural infrastructure accessible to farmers on the post-harvest side. Origo Commodities will put all efforts to facilitate the requisite infrastructure which can reap huge benefits for farmers and transform the rural supply chains. Origo Commodities will also extend its support in creating multiple integrated marketing platforms and storage infrastructure to sustain the activities of PACS and FPOs on post-harvest side.”
Under the current MoU, NABARD and Origo Commodities will be creating awareness among Primary Agriculture Co-operative Societies (PACS) and farmers on Negotiable Warehouse Receipts and measures to avoid “Distress Sale” at the time of harvest.
