When the WDRA established the electronic Negotiable Warehouse Receipt (eNWR) ecosystem in 2016, it anticipated that eNWR might be utilized as a three-in-one instrument. This necessitated the discovery and execution of fundamental Repository functionalities.
WDRA first determined that trading the underlying commodities through recognized commodity derivative Exchanges would result in effective commodity price discovery.
Warehouse Receipts in electronic form (eNWR) were envisioned to allow banking and commerce to take place without the need to physically exchange products. It is common knowledge that price discovery in the commodities market assists farmers in making informed decisions about their future planting patterns and other farming-related activities. Price certainty is increased with futures trading.
The development of a 'Spot Market of eNWRs' can also bring together all three markets (primary, secondary, and tertiary) where farmers and Agri-participants can readily participate through WDRA registered warehouses. The eNWR makes trading on the Exchange and the Spot Market as transparent as feasible.
The eNWR ecosystem already provides numerous benefits to its users and players. Because it is a WDRA-regulated ecosystem, it also delivers trust, transparency, and security. The Repository provides centralized real-time internet recordkeeping. The eNWR can be traced at every step because to real-time data dissemination. It also promotes the easy transfer and dividing of eNWR, reducing paperwork and eliminating the need to physically transfer items.
WDRA verifies that warehouses issuing eNWRs are standardized and meet the standards required to assure the safety of the commodities held. It has also encouraged banks to offer simple financing choices at reduced interest rates. The approach also instills trust in bankers while incurring no additional costs for collateral monitoring or surveillance. eNWR, as a tradeable instrument, assures that commodities held in warehouses are traceable and secure.
These commodities represented by eNWR can be sold on registered online electronic platforms such as eNAM, Agri Bazar, NCML market yards, NCDEX E-Markets Ltd. (NeML), or other similar online electronic platforms, resulting in better price realisation and the opportunity for arbitrage and hedging. Fair spot-futures pricing co-movement and ultimate convergence is facilitated by a credible and efficient warehousing system. As a result, efficient price discovery occurs during the process. Fair co-movement of futures and spot prices is essential for hedging efficacy.
The WDRA warehouses prioritize scientific storage and quantity maintenance through the use of new technologies such as weighing equipment, fumigation, sampling, testing, grading, transportation and handling, warehouse construction, flooring and ceiling, doors and windows, air circulation, temperature control, and so on. eNWR possesses all of the characteristics required to become a robust negotiable instrument as well as a security instrument, as envisioned by the RBI and SEBI for formalizing agriculture finance and trade.
(Source- The Hindu Business Line by Kedar Deshpande)
