Blockchain beneficial for government and farmers in procurement of agricultural produce

A blockchain pilot project by the Maharashtra State Warehousing Corporation (MSWC) in commodity finance has shown promising signs. Blockchain is a ledger technology that allows data storage in many servers in a decentralised manner which is viewed nearly in real-time by anyone with access. With the help of this technology, farmers can access loans against their commodities within 24 hours as against seven days in the traditional way.

Commodity finance refers to the loans extended by financial institutions against agricultural produce. Loans can be availed on the produce of warehouse receipts given to farmers or traders from accredited warehouses. The concept is aimed at helping farmers get better prices for their produce and prevent distress sales at low prices.

– Stay updated with the latest Pune news. Follow Express Pune on Twitter here and on Facebook here. You can also join our Express Pune Telegram channel here.

The project which was run as a pilot during the fiscal of 2020-21 saw the participation of 185 farmers and loans worth Rs 3.63 crore were issued. This fiscal, already 423 farmers have availed of the receipt and loans worth Rs 9.75 crore have been issued.

Deepak Taware, chairman and managing director of MSWC explained warehouse receipts have been promoted by both the central and state government for better realisation of farmers. “At the start of the harvest season, farmers are hard-pressed for money and often are forced to sell their produce at lower prices. The prices take a beating as supply is more than demand in the markets,” he said. Instead of offloading their entire produce at one go, farmers can fare better if they stagger their sales and warehouse receipts have been used to achieve this.

However, the process of commodity finance is both time-consuming and convoluted. Farmers bring their produce to the warehouse, post which the receipts are generated. The physical receipts are then taken to the bank who post verifying the stock would issue the loans. Normally the time taken can be anything between seven to 15 days which defeats the whole purpose of the scheme.

Blockchain, Taware said, would help in reducing the time and make the process of accessing finance real-time. The corporation has entered into a special agreement with the Maharashtra State Cooperative Bank for this scheme. At 203 warehouses of the corporation which are using the technology, receipts are issued immediately. The platform can be accessed by the bank which after verifying the stock would issue finance. The whole transaction can be wrapped up in 24 hours. Given the fact that banks get to know the real time when receipts are issued, they call up farmers to upsell their commodity finance scheme.

Taware said they would be upscaling their project this season. “Also, we are in talks with government agencies to get them on the blockchain platform. This would help to streamline government procurement and allow farmers to get faster payment,” he said.