Public RelationsMinistry wants to bring warehouses under FMC
The Union Ministry of Consumer Affairs has proposed to the prime minister that the Forward Markets Commission, the regulator for commodity futures, also be the regulator for all warehouses.
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The move, it says, will synchronise activities related to commodities trade taking place on nationwide electronic platforms. It is a sequel to the finance ministry’s earlier proposal to place commodity futures regulations under the Securities and Exchange Board of India, the regulator of the financial markets.
The consumer affairs ministry opposed it. Warehousing regulations are its charge and it is also the parent ministry for the FMC .
Commodity futures and capital market regulations, protested the consumer ministry, are quite different, as the interests of their stakeholders are not the same. Traders and players on commodity futures exchanges use warehouse facilities to comply with norms and quality standards laid out by the FMC. A Warehousing Development & Regulation Act was passed last year and it said a separate regulator should be appointed for this segment. The government is yet to decide who should do this job.
However, Abhijit Sen, member, Planning Commission, and chairman of a committee set up to discuss the implications of commodity futures on inflation, said the Warehouse Act provides for a separate regulator and to now put it under FMC requires an amendment. But, added: “Both the activities are related and should come under a single ministry.”
The ministry feels keeping both under the same regulator will ensure proper and coordinated development and regulation of the sector.
The Warehousing Act is aimed at creating scientific grading, handling and storage of commodities and creating electronic negotiable warehouse receipts. Such receipts can be used for delivery on the exchanges falling under FMC and national spot exchanges, which ministry also wants regulated by the FMC.
FMC has so far accredited 69 warehousing agencies, having a total capacity of 1.41 million tonnes spread over 14 states. Thus, it has experience of handling scientific storage warehouses and negotiability of warehouse receipts.
Since FMC is already doing this, a separate regulator for warehouses will create dual regulations and possible regulatory conflicts, is the ministry’s argument. National spot exchanges set up by commodity futures exchanges should be brought under the FMC, it adds, as these spot exchanges would also be giving delivery through the negotiable warehouse receipt system.