Warehousing framework for non-agriculture goods proposed

Source: The Hitavada      Date: 06 Dec 2018 09:36:50


Business Bureau,

MARKETS regulator SEBI has proposed a framework for warehouse companies and other allied service providers engaged in non-agricultural goods, a move which will help in improving the delivery and settlement mechanism. The proposed guidelines would be applicable for warehouses and assayers engaged in non-agricultural commodities such as precious metals, gems and stones, metals, minerals and alloys but excludes crude oil, electricity and natural gas.

At present, stock exchanges or clearing corporations have prescribed certain storage norms regarding non-agricultural commodities but there is no uniformity in the norms specified by such entities. In order to ensure efficient delivery by the clearing corporations (CC), SEBI is considering a broad set of standards and norms for compliance by CC accredited storage agencies for storage of physically delivered non-agri goods.
Under the proposal, Sebi said there should be a tripartite agreement among stock exchange, clearing corporation and warehouse service providers (WSP).

WSP should be a corporate body with the subscribed and paid up share capital of Rs 10 crore, the regulator said in a draft paper dated November 29.  An accredited WSP providing storage services should have a minimum net worth of Rs 25 crore for precious metals, gems and stones, while the same should be Rs 10 crore for single metal and Rs 25 crore for multiple metals. Existing WSPs should meet the requirements prescribed latest by March 31, 2020.

“Further, the clearing corporation shall ensure that the value of the goods stored in the accredited warehouses of WSP shall not, at any point of time, exceed 33 times of the net worth of the WSP,” as per the proposal.  SEBI observed that warehousing or storage infrastructure and its ancillary services play a critical role in the delivery mechanism of the commodity derivatives markets. "

A robust and credible warehousing infrastructure is sine qua non for an effective commodity derivatives market that can inspire confidence amongst the market participants and other stake holders," the regulator noted. The SEBI has sought comments from the public till December 29 and a final regulation will be put in place after taking into account views of all.