E-warehouse receipt financing: does the math work?

Business Recorder

23-04-2025

Punjab's policymakers have found themselves a shiny new toy: Electronic Warehouse Receipts. On paper, the EWR system is everything a modernizing state dreams of—market-based, tech-enabled, collateral-driven. The logic is compelling: let farmers store their grain in certified warehouses, use the receipts to borrow from banks, and wait to sell until prices recover. All while the government steps aside from procurement and claims it has 'liberalized' the market.
But out here in the real world—where timing, liquidity, and working capital decide whether the next crop gets sown or not—the math simply does not work.
Let us start with what EWR does not do. It does not give farmers money when they actually need it: immediately after harvest, when the next cropping season begins. This is when farmers are scrambling to buy certified seed, fertilizer, and crop protection. It is also when they are least interested in playing warehouse games or timing the market like commodity traders.
Ask any grower in south Punjab or central districts cultivating ten to fifteen acres—often leased in part, credit-financed in full—what is needed in May. The answer is not a warehouse receipt. The answer is liquidity.
The average per acre cost of certified inputs for the next season stands at roughly Rs 30,000. Multiply that across ten acres and the result is three hundred thousand rupees in immediate cash need—just to stay in the game. Not to invest, not to expand. Just to plant.
But what does the state offer in return? A one-time cash transfer of Rs 27,000—per farmer. Not per acre. Per farmer. Whether one farms two acres or twenty. It is not even a drop in the bucket—it is an insult to the arithmetic.
If EWR is meant to replace state procurement as the liquidity engine of the rural economy, it is failing on day one. And that is not because the idea is flawed—it is because it has been dropped into a system that is not ready for it.
There are three brutal mismatches here.
First, the timing mismatch. EWR relies on storing wheat post-harvest and using it as collateral for loans. But that is too late. Farmers need liquidity before they can afford to wait. EWR helps those with surplus. It does not help those struggling to fund the next cycle.
Second, the price mismatch. The government, while preaching market deregulation, is actively offloading yesteryears' grain stock into the market through food departments. That suppresses prices. So even if a farmer warehouses wheat and waits, what exactly is the expectation? A market signal that is being distorted from above?
Third, the scale mismatch. Most farmers in Punjab operate on five to twenty acres. That is a scale at which a Rs 27,000 cheque is not even enough to cover urea, let alone pricey hybrid seed or pesticides. Meanwhile, the EWR system is geared toward players who can wait, hedge, and afford to navigate formal credit channels. That is not the median farmer. It is the aggregator, the trader, the commission agent.
And here is the kicker: those traders—yes, the same vilified aarthi class policymakers want to cut out—actually have the liquidity and rural networks to make EWR work. Instead of co-opting them as partners, the state has excluded them. And in doing so, it has ensured that the reform is neither inclusive nor effective.
This is not market liberalization. This is financial displacement without a safety net. A warehouse receipt is only as good as the trust in the price it can fetch, and the credit it can unlock. In a system where price signals are manipulated and credit markets are illiquid, it becomes little more than a piece of paper.
The real tragedy here is not that the idea is bad—it is that it is being wasted. EWR can work. It can modernize trade. It can formalize transactions. But only if the sequencing is right. Only if farmers have the option to hold, not the burden to wait. And only if the state gets out of the business of micromanaging prices while pretending to liberalize them.
Punjab's policymakers seem keen to showcase this transition as reform. But a reform that replaces one broken system with another ill-timed, half-baked substitute is not a step forward. It is a stumble in the dark.
EWR is not the villain. But the way it is being sold—and worse, implemented—risks turning it into yet another example of reform theater: high on optics, low on impact.
And come June, when fields should be green with the next crop, many growers may find their land idle—not because they lack will, but because they lacked working capital.
Liquidity cannot be sown with warehouse receipts. It must be financed. And at the moment, nobody is.