FMC may oversee spot market, warehousing

The Forward Markets Commission (FMC), the commodity futures market regulator, has written to the ministry of consumer affairs and other ministries concerned to become the single regulator for commodity futures and spot markets and warehousing.

“Instead of appointing a separate regulator to monitor warehouses, the appointment of FMC as their regulating agency would be prudent with warehouse being closely linked with futures market for delivery,” said FMC chairman, B C Khatua in the sideline of the seminar Warehousing 2008 here on Tuesday.

In fact, spot movement of commodities is governed by the state government under Agricultural Produce Marketing Committee (APMC) Act (WDRA) but a unified agency at the Centre level is required for monitoring, he added.

Additionally, the government is considering to set up a separate regulator under the Warehousing (Development & Regulation) Act 2007 to monitor movement of agri commodities at warehouses.

“If the FMC is given autonomy, it would create manpower, charge fees from member exchanges and brokers and deal with every stakeholder of commodity similar to what Security & Exchange Board of India (SEBI) is doing with equities,” he added.

Highlighting the need for “a single” regulator than the three separate for spot, futures and warehouses, Khatua said, “One regulatory system would not only give fillip to the quality storage of agri commodities but would also link farmers with spot and futures market for better realisation of their produce.” In this process, warehouses, spot and futures, all the three markets of commodity eco-system, would function smoothly and avoid any clash with each other, Khatua quipped.

Meanwhile, the government has decided to notify the WDRA on March 1, 2009 which will make the warehouse receipt issued by the credible agency “negotiable”. The most important aspect of this WDRA is the negotiability of receipt without the actual movement of goods which means the entire commodity eco-system would have better trustship between the two consequent stakeholders. The banks would be able to finance farmers without any hesitation while farmers would get better realisation of their produce by selling it during the demand season.

Apparently, the fungibility of goods for delivery, within the state or outside the state territory, will also be sorted out smoothly provided the warehouse of origin and destination of receipts are registered with the regulator. The implementation of the WDRA will pave the way for qualitative agri commodities available to consumers at reasonable prices. Farmers will also get the maximum value to their produce, said Akhilesh Prasad Singh, MoS for Agriculture, Consumer Affairs.