Forward Markets Commission tightens rules for warehousing service providers

MUMBAI: Commodity market regulator Forward Markets Commission, or FMC, has strengthened the warehousing accreditation norms to avert an occurrence of an NSEL-like scam in the commodity futures market. The new norms will take effect after March 31, 2015 and the existing warehouse service providers (WSPs) in their current format will not be allowed to operate in the exchange space beyond June 30, 2015.

FMC will set down net worth, ownership and corporate governance norms for WSPs in exchanges like MCX, NCDEX, ACE and NMCE. While MCX is predominantly a metals and energy bourse, NCDEX is the country's largest agri bourse. ACE also focuses primarily on agri products while NMCE is a plantations exchange. Currently, no uniform norms regarding ownership, financial status or corporate governance exist for WSPs, with each exchange having its own norms. That is set to change. Promoters of WSPs must have good business repute and at least three years' experience in running public warehouses under the new norms.

The WSP should be a corporate body with a professional management and have a minimum net worth of Rs 25 crore, which may be relaxed to Rs 10 crore for warehouses providing services for a single commodity at a particular location. The WSP shall furnish security deposit, to be monitored daily visà-vis value of goods, in the prescribed format by the exchange equal to 3 per cent of value of goods less than or equal to Rs 250 crore, 4 per cent of value above Rs 250 cr and equal to Rs 500 crore and 5 per cent of value above.`500 crore of goods stored in warehouse.

The WSP should ensure periodic audit of stocks in the warehouse and provide report of the same to the exchange within a week of completion of the audit. ACE managing director and CEO Dilip Bhatia said this would strengthen infrastructure norms in the exchange space which was "imperative". The Rs 5,600-crore NSEL scam was caused by exchange accredited warehouses not ensuring that goods of right quantity or quality were maintained by counter parties on the bourse.