Commodity market regulator Forward Markets Commission (FMC) has allowed exchanges to establish a network of warehouses across the country to reduce transport cost and encourage more deliveries of agri commodities.
“We have given permission to commodity exchanges to start accreditation of warehouses owned by big producers, processors and manufacturers for bulk commodities only,” FMC Chairman B C Khatua said.
FMC, which took this decision on March 16, said that the exchanges would accredit warehouses to store traded commodities with output not less than one million tonnes a year in the country.
An exchange official confirmed receiving the direction from the regulator and said this decision would help increase business as more people would come to the futures platform to take delivery since quality was guaranteed.
“The accreditation of warehouses will reduce the transportation cost for big producers and processors who stay far away from main delivery centres,” FMC member Rajeev Aggarwal said.
He further said that the new norm would help big producers to store bulk commodities in these warehouses.
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Besides, the FMC has also allowed exchanges to nominate ‘satellite warehouses’ within 100 km of the delivery centre to help small and medium traders to participate in the futures market.
“The satellite warehouse system will enlarge the scope of delivery as a network of warehouses will be established around primary delivery centres,” Aggarwal said.