The main idea of the workshop is to prepare the commodity trading community (including producers and farmers) for this vital instrument which doubles up as a trading instrument and financial instrument. The warehouse receipts system is expected to pave way for efficient warehouse infrastructure.

The workshop will be inaugurated by the food and consumer affairs secretary K Srinivasan. Experts from India and all over the world will make presentations on the subject.

The speakers include Lamon Rutten (UNCTAD), Christian Georg (SGS Geneva), Ms Eppor Heemstra (Pierson of Singapore); Hans Hannart (Rabobank India managing director); Daniel Robinson (Day Robinson UK), Reserve Bank of India executivedirector Mr Ahmed; G Ramachandran (Business Intelligence Unit, Chennai), Shivkumar (ITC), MD Lal (former managing director, Cotton Corporation of India) and P Chandrasekharan (Business Line commodities editor) among others.

Trading in warehouse receipts is a widely accepted practice in the developed markets where the commodity futures trading is very much in vogue. In India, trading in commodity futures is yet to be taken seriously by cross section of entities engaged with commodities--producers and farmers to the end-user.

Trading in commodity futures was almost banned by the government for the past three decades. It was only recently that the government permitted trading in futures of cotton, coffee, hessian, castoroil and the bye-products of seven oilseeds. The basket for commodity futures therefore is now fairly large for all concerned to take interest, including the financial institutions.

The existing commodity exchanges are yet to be manned efficiently and equipped financially to successfullytrade in futures of the permitted commodities. However, with the government intending to hasten the process of commodity futures trading in the country, if necessary through a new national commodities exchange, the discussion and awareness of WRS will be more timely.

"A warehouse receipt system would have the effect of activating and modernising the commodities trading," said Forward Markets Commission (FMC) chairman VK Agarwal.

Addressing newspersons, Aggarwal pointed out that a farmer or a commodities trader could have access to finance using a warehouse receipt. "The workshop is expected to make important recommendations relating to structured finance for commodity markets and suggest a blueprint for building a viable WRS for the country.

A WRS would allow efficient transferability of stocks irrespective of whether the delivery was for spot or forward, apart from lending itself to hypothecation.

The receipt would also allow a financier to lodge a claim against receivables and establish linkageswith the banking system.

Observers from one of the leading commodity exchange say the workshop needs to dwell on the following important issues as well.

First, WRS should promote futures trading in the country, which currently is not too popular and is languishing in many cases despite existing comexes and government permitting quite a handful of commodities to trade in. Also, it should help the community set up selection grade control system, say for cotton to facilitate futures trading in cotton.

Currently, though the banks extend finance for various commodities, the margins retained by the banks at around 30-35 per cent is said to be very high. This could be brought down to around 10-15 per cent, which could help farmers get a good finance for their produces.

Second, the transferability of produce from one state to the other attract levies twice -- once, as central sales tax at the time of transfer (and not sales) of goods from one state to the other. This transfer is done with an intention tostack the goods in the other state only to sell from that state. The state from which the goods are actually sold once again attracts state sales tax, which is dual taxation. The seminar needs to address the elimination of this dual levy.

Third, in order to make WRS an acceptable mode of transaction, it would be important for the organisers to discuss the importance of securitising the receivables. The current practice of mills and corporates to delay payments and even reduce the dues, the practice of bills discounting and WRS becomes extremely difficult.