No stock limits on commodities in regulated warehouses: FMC

In a big relief to commodity futures market players, the government has exempted commodities kept in regulated warehouses from the purview of stock limits imposed by state governments to curb hoarding under the Essential Commodities Act.
This was one of the key reforms that commodity markets regulator Forward Markets Commission (FMC) was pushing with the Consumer Affairs Ministry for last few years.
In a latest circular, the Commission said: "Department of Consumer Affairs has informed that the commodities kept in regulated warehouse (registered by the Warehousing Development and Regulatory Authority) have been exempted from stock holding limits under the Essential Commodity Act, 1955."

The exemption has been given subject to the condition that these warehouses publish the information of stock available with them on a real time basis, it said.
The Department has also issued an advisory to all the state governments in this regard, it said and asked the commodity exchanges to inform all market participants about the development.
With this reform, the government has resolved discrepancy between the two central laws -- Essential Commodities (EC) Act and Forward Contracts Regulation Act (FCRA).

While EC Act allows state governments to set stock holding limits for licensed dealers of commodities, conflicting with FCRA which permits a holder of a commodity futures position to give or take delivery of essential items in excess of prescribed stock limits under the EC Act.

Currently, there are four national and six regional level commodity exchanges in the country.
SMC Comtrade Chairman and Managing Director D K Aggarwal said, "This was a long pending demand. Many traders were not hedging big quantities due to stock limits issue. Now this step will encourage genuine volumes in essential items in the commodity exchanges.