‘No stock limit’ for commex warehouses

Commodity market regulator Forward Markets Commission has exempted goods stored in the warehouses servicing commodity exchanges from the purview of stock holding limits imposed by State Governments.

Warehouses exempted from stock limit under the Essential Commodities Act have to make available data on goods stored in the warehouse on a real-time basis.

State Governments impose stock limits whenever prices of a particular commodity spurts in short span of time without any major reason.

Last year, the commission made it mandatory for all commodity exchange-accredited warehouses to register with the Warehouse Development Regulatory Authority.

Quoting from the Consumer Affairs Ministry notification, FMC said an advisory in this regard has also been issued to all the States.

Samir Shah, Managing Director, National Commodity and Derivatives Exchange, said the exchange has long been arguing with the regulator and ministry that stocks stored in exchange-recognised warehouses play an economic role in price discovery and cannot be compared with that of hoarding.

“The stock limits imposed by State Governments often interfered in the price discovery process and posed a hurdle in convergence of spot and future prices,” he said.

The FMC order has bought in much-needed clarity and may bring back investors who were keeping away from the futures market for fear of a raid. It will also help resurrect volumes on the futures exchange that are on the downtrend since the government imposed commodity transaction tax last year. A few chana traders at Bikaner in Rajasthan and sugar producers at Kolhapur in Maharashtra recently faced the wrath of their respective State Governments after they implemented stock limits.

Anticipating clarity on warehouse stock limits to bring in volumes in long term, Shah said it would boost hedgers and traders confidence and bring them on the exchange platform over a period.

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