Sebi moots warehousing norms for farm commodities traded on NCDEX

The proposed norms are aimed at ensuring good delivery of commodities during settlement of futures contracts. 

Under the proposed norms, warehouse service providers (WSP) will be a corporate body with the subscribed share capital of Rs 10 crore. An accredited WSP providing warehousing services would have a minimum net worth of Rs 50 crore for multi-commodities and a minimum net worth of Rs 25 crore for a single commodity.

“For a WSP servicing multiple exchanges, the above net-worth requirements shall be increased by the number of exchanges serviced,” as per the proposed norms. The commodity exchange would have to ensure that the WSP, its promoters and key management personnel are ‘fit and proper’ to carry out business of warehousing. 

“Warehousing infrastructure and its ancillary services play a critical role in the delivery mechanism of the commodity derivatives market. 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,” Sebi said. 

Sebi has proposed to revise the norms for the WSPs, warehouses, and assayers, while superseding the earlier regulation, on the basis of various observations received during visits to different warehouses, meetings held with the WSPs and national commodity derivatives exchange.

The final norms will be put in place after receiving suggestions from all the stakeholders. 

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposed norms till June 17. The regulator said that for accreditation of WSP, the commodity exchanges will follow a transparent process by issuing open advertisements in leading newspapers and putting up on the exchange website. 

A WSP can be accredited with more than one exchange. Besides, the exchange would not make it mandatory that its WSP cannot provide services to another bourse. Sebi said that WSP’ promoters should be responsible entities of repute with a good business reputation and credibility and who are in the business of public warehousing for at least three years.

 They should have an adequate knowledge of and experience in generally accepted warehousing and handling practices for commodities.