SEBI recommends warehousing regulations for non-agri commodities

Market watchdog, Securities and Exchange Board of India (SEBI), wants to push a set of regulations for warehousing companies and related suppliers for non-agricultural goods. This much-needed step will improve the speed of distribution and settlement.

SEBI says that storage method and mechanism along with its additional services has a key role in ensuring smooth trade.

Every warehouse and metal testing company dealing in non-agri commodities like gold, silver, other metals, precious stones, minerals and alloys will need to comply with the regulatory framework. It will not be applied to natural gas, electricity and crude oil.

Stock exchanges rely on their own (through contracts) clearing corporations (CCs) to ensure swift delivery and settlement. Currently, they follow some unwritten storage rules pertaining to such goods. But, there is a need to bring in uniformity and transparency.

This is why SEBI is planning to introduce a set of guidelines and compliance standards for CC-authorized warehouses for physical delivery of the aforementioned goods. The regulator also stressed on the need for a tripartite contract among the warehouse companies, CC and the stock exchange.

As a corporate body, the warehouse service provider must have Rs. 10 crore share capital as per the first draft released on 29 November. A qualified warehouse firm giving storage facilities must have at least Rs. 25 crore net worth for precious jewels and metals. If it deals with only a single metal, then the mandated net worth is only Rs. 10 crore.

Prevailing warehousing providers must meet the given requirements before 31 March 2019. Moreover, the clearing corporation should make sure that the value of the commodities taken by the warehouse should not be more than 33 times of the storage company’s net worth.