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Rajalakshmi Menon

MUMBAI, Jan. 17

COMMERCIAL banks can start funding farmers against godown or warehouse receipts, if the proposal put forth by the National Bank for Agriculture and Rural Development (Nabard) gets the nod from the Government.

Introduction of warehouse receipts system will not only meet the temporary financial needs of the farmer but also allow him market his produce at a time of his choice. Today, farmers are forced to dispose of harvested stocks for want of storage infrastructure as a result of which they are unable to obtain remunerative prices.

Following recommendations in the 2000-01 Union Budget, Nabard has formulated guidelines for banks to finance rural godowns. This financing will be included in the 40 per cent lending towards the priority sector.

In the first year, around 5,500 rural godowns have been planned and bank officials estimated that the 14-18 per cent loss in non-perishable items could be reduced.

According to one bank official, ``the objective of creating rural godowns is to reduce losses that arise out of poor storage facilities in rural areas, to allow farmers to earn a higher remuneration on their agricultural produce and to provide financial relief to the farmers from moneylenders.''

Banks will finance private entrepreneurs to construct these godowns at an interest rate of PLR plus one per cent. Nabard, in turn will refinance banks. Farmers can now park their agricultural produce in these godowns by paying rents and release their produce to the market when the price is reasonable.

The rent charged over a period of time to the farmers will enable the entrepreneur to pay off his loan to the bank.

The farmer, too, can borrow from banks by pledging the godown receipt. This, according to bank officials, will help in monetisation of rural economy and develop the banking habit among farmers. This facility will enable farmers to generate money from their own produce to pay back a part of the high cost loan from money lenders and meet some of their day-to-day urgent needs. It would also reduce the subsidy burden on the Government on procurement of excess produce, says another official.

A reasonable spread of agricultural storage godowns linked to banks to provide pledge loan will help in meeting the needs of the farmers as it will not only provide the basic infrastructure for making arrangement for the pledge loan but also preserve the quality and quantity of their produce over a longer period of time. Farmers will also be able to sell their produce when prices are higher thus ensuring a decent return on their labour and investments.

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