the sidelines of the Nepal Investment Summit 2019, which was organised in the capital on March 29-30, Nepal Warehousing Company Limited (NWCL) announced a technical tie-up with the Indian commodity-based supply chain services provider National Collateral Management Services Limited (NCMSL) to set up large scale grain storage and commodity market facilities in Nepal. Incorporated in 2004, NCMSL has enabled various stakeholders in the commodity value chain to manage their risks. Unupom Kausik, deputy CEO of NCMSL was in Nepal to attend the Nepal Investment Summit 2019 and to sign the agreement with NWCL. In an interview with New Business Age, Kausik shed more light on the partnership between the two companies, services and assistance to NWCL along with the prospects and problems in the commodity warehousing business in Nepal. Excerpts:
How is NCMSL in the commodity value chain across India?
NCML has created a sector called post-harvest management services. There was no such sector in India before the establishment of NCMSL. The group, after starting its operation in 2004 as a warehouse company, has added multiple business verticals meant to meet the needs of the producers - farmers in our case.
Farmers have many requirements in terms of warehousing, in terms of valuation of products (quantity and quality), in terms of securitisation, i.e. money on their products so that it is not sold in distress, getting credit on the products and providing the flexibility and freedom to decide the time of sale. Therefore, NCMSL has added all these services to its portfolio, and that has enabled the company to create a compelling paradigm for the benefits of farmers in India.
What types of services does NCMSL provide?
We provide all kinds of services immediately after the goods are out of the farm. At the first instance, if the farmers need to know the value of their products, we offer testing and inspection services. Farmers can get their product tested and can get an accurate assessment of the quality of their product to determine its commercial value.
Secondly, farmers need a scientific storage facility to store their products, and we allocate it to them in multiple formats. We offer storage in flat, silos and cold warehouses. In case the farmers require additional support after storing their products then we issue them a warehousing receipt, through which they can raise money by pledging it to a bank or any financial institution. This gives farmers the full freedom to exercise the timing of their sale.
The farmers are not under duress during the harvest to go and sell their products to the neighbourhood trader. They may sell it two to three months later, or whenever the prices are high. Further, NCMSL also offers market yard (MktYard.com), an electronic platform. With this digital platform, farmers can provide their warehousing receipt issued from our warehouses to traders located 5000 km away from them. So, we support the farmers from the valuation of their crops to the realisation of their product.
NCMSL has announced its collaboration with Nepal Warehousing Company Limited (NWCL). What are the key features of this collaboration?
It is primarily to offer the pool of knowledge and technology that we have built in the past 14 years. With that technology transfer, we are sure that NWCL will be at the core of the transformation in Nepal’s agriculture sector. The best facilities and services that farmers are receiving in India for their crops will be made available to farmers here in Nepal through the route of technology transfer as well as knowledge sharing between NCMSL and NWCL.
How will NCMSL provide its support for the growth of its new partner NWCL? What areas will the support be extended to?
We are open and excited to share our accumulated knowledge. NWCL will receive all fourteen years of our expertise and experience. Once this happens all the other industries in Nepal will also emulate them and try to learn the same thing from them, and it will benefit the entire ecosystem.
We will be offering our technology and knowledge to them in warehousing, collateral management, testing and inspection laboratories and even the price discovering mechanisms platform will be made available. So, everything that we have done will be shared with NWCL for them to create the same paradigm for the Nepali agriculture sector.
What are your observations on the problems and prospects in the warehousing business in Nepal?
I think government support is needed to make warehousing an attractive sector for investors like NWCL to commit more capital. It is very capital intensive business, and there has to be some amount of subsidies and provision, which should be looked at by the government because warehousing is not owned by a promoter, but by a farming community. The government, being a stakeholder in the well-being of farmers, should look at the warehousing sector for regulatory reforms and some regulatory provisions that will help the industry to grow.
What government policies are required to help build a commodity value chain like that created by NCMSL in India?
The government of India advised the central banking and the National Bank for agriculture and rural development (NABARD), a para-banking institution, that any investment or any loan to a warehousing company be identified as a priority sector of lending. For the banks to use their lending to warehousing companies as a priority sector obligation is what I think the banking regulation in Nepal requires. Banks should also provide loan at an affordable interest rate because a warehouse is a long-term investment project. The first and foremost beneficiary of scientific storage is the farmer.
How was the Nepal Investment Summit 2019 like for you?
My colleague Nalin Rawal and I met many excited people from all over the globe who are happily surprised to see this change coming from Nepal. The country is inviting international capital and expertise in the relevant sectors, and the slogan that I have noticed is Rail Road, Energy, Agriculture and Tourism (RREAT) development, which I think is going to be successful and people are going to enjoy it.