SEBI proposes warehousing norms for non-agri goods

SEBI has proposed a framework for warehouse companies and other allied service providers engaged in non-agricultural goods, a move which will help in improving the delivery and settlement mechanism.

The proposed guidelines would be applicable for warehouses and assayers engaged in non-agricultural commodities such as precious metals, gems and stones, metals, minerals and alloys but excludes crude oil, electricity and natural gas. At present, stock exchanges or clearing corporations have prescribed certain storage norms regarding non-agricultural commodities but there is no uniformity in the norms specified by such entities.

In order to ensure efficient delivery by the clearing corporations (CC), SEBI is considering a broad set of standards and norms for compliance by CC accredited storage agencies for storage of physically delivered non-agri goods. Under the proposal, Sebi said there should be a tripartite agreement among stock exchange, clearing corporation and warehouse service providers (WSP). Sebi observed that warehousing or storage infrastructure and its ancillary services play a critical role in the delivery mechanism of the commodity derivatives markets.

“A robust and credible warehousing infrastructure is sine qua non for an effective commodity derivatives market that can inspire confidence amongst the market participants and other stake holders,” the regulator noted. The Securities and Exchange Board of India (SEBI) has sought comments from the public till December 29 and a final regulation will be put in place after taking into account views of all the stakeholders.

As per the proposal, WSP should put in place a business continuity plan and submit such plan to the clearing corporation.

Clearing corporations should have to ensure that the WSP, its promoters and key management personnel are ‘fit and proper’ to carry out business of warehousing. Also, they need to ensure that the accredited WSP has a professional management team to oversee its functioning and operations. Besides, clearing corporation should ensure that the WSP should ideally own the warehouse. Alternatively the WSP should hold a direct lease with the owners for at least 3 years.

The clearing corporation should ensure that the WSP for precious metals, to be eligible for accreditation, has reasonable facility and infrastructure for proper handling and storage of commodity. Besides, clearing corporation may take necessary action against WSP if the warehouse is unable to meet the requirements of an accredited warehouse and fails to improve the standard within the stipulated time. Further, they should frame necessary code of conduct for the WSPs, warehouses, vaults and assayers.

The clearing corporation should upload a status report on their websites by the fifth of every month giving the details of the number of applications received for accreditation of warehouses; those pending for registration as well as rejected ones along with the reasons.

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