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FMC for warehouses to be listed with their regulator

The number of warehouses recognised by the six futures exchanges is a few hundred. MCX has recognised a little less than 200 warehouses

Rajesh Bhayani  |  Mumbai 

Having learnt a hard lesson from the National Spot Exchange Limited (NSEL) fiasco, the Forward Commission (FMC) is considering a proposal to get all recognised warehouses of futures exchanges registered with the Warehousing Development and Regulatory Authority (WDRA).

FMC, the commodity futures market regulator, will soon issue directives to all six futures exchanges in the country to get the warehouses recognised by them registered with the WDRA.

The move follows WDRA writing to the consumer affairs ministry and the FMC saying the spot exchange-recognised warehouses should be asked to mandatorily register with WDRA. The authority had also said that if the NSEL-recognised warehouses were registered with it, the issue of empty warehouses would not have arisen.

The total number of warehouses recognised by the six futures exchanges is a few hundred. MCX alone has recognised a little less than 200 warehouses.

FMC plans to issue a directive to the exchanges that fresh recognition should be to those warehouses with WDRA registration. Warehouse already recognised by the exchanges will have to get the registration within the next four months.

The move, however, increases the cost of compliance for warehouses and many of them may not get WDRA registration due to the stringent norms followed by the warehousing regulator.

WDRA's criteria include construction according to Bureau of Indian Standards norms, and the specifications by the Food Corporation of India and the Central Warehousing Corporation, among others. There are some weird criteria, too. For example, there should not be any trees near the warehouse! The authority has also prescribed a licensing fee structure for them. According to warehouse industry sources, some criteria are such that if the warehouse is under-utilised, then it cannot store non-WDRA conforming commodities in the warehouse and, therefore, it may prove a loss proposition for the warehouse and the exchange.

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First Published: Fri, August 30 2013. 00:40 IST