Exempt accredited warehouses from stock limits, says Sebi

The Securities and Exchange Board of India (Sebi) has written to the finance ministry seeking exemption for exchange-accredited warehouses from stock limits under the Essential Commodities Act.

“We want warehouses registered with commodity derivatives exchanges to be exempt from stock limits,” said S K Mohanty, executive director, Sebi. He was speaking on the sidelines of a two-day conference on agriculture supply chains here on Monday.  There are 1.4 million tonnes of warehousing space accredited with exchanges.

Stock limits now apply in sugar and pulses. Among pulses, only chana is allowed to be traded on the futures market. Here too, launch of new contracts has been suspended because of a spike in spot prices. Sugar mills and traders face stock limits.
 

“With Warehousing Development and Regulatory Authority (WDRA) registration, we are sure of 60-70 per cent of the oversight. Over and above WDRA regulations, we introduce norms to improve efficiency,” Mohanty added. Experts said the government should only purchase the minimum quantity required for market intervention through minimum support prices. The food subsidy could be paid into beneficiaries’ accounts, they added.

"The government's initiative on private sector's participation in minimum support price foodgrains procurement in a few geographies in eastern India, augmenting the foodgrains storage capacity under various schemes, without actually engaging physical procurement leads to significant wastage of government funds. Apart from that the initiatives like enabling food security to the vulnerable section of the society through direct benefit transfer are significant developments, which will substantially change the contours of this sector and lead to meaningful participation of private sector in overall foodgrain trade," said Anil Choudhary, managing director and chief executive officer of National Bulk Handling Corporation. India has storage facilities for 120 million tonnes of grain against an annual output of 265 million tonnes. Only 10 per cent of the country’s fruits and vegetables can be stored in cold chains.

“Implementation of the goods and services tax will affect the food processing sector. But it is not clear how the agriculture sector will be affected as many commodities are tax exempt,” said K V Mahidhar, executive director and head of the CII Institute of Logistics.

Meanwhile, the commodity markets regulator said in a circular on Monday that brokers have to collect extreme loss margins upfront from clients and any short-collection or non-collection shall face penalty from the trading day itself.

On September 7, when Sebi issued a circular regarding this, it was said that upfront margin shall be collected on the trading day. Monday’s circular clarifies the situation and makes Sebi’s earlier stand tougher.

SEEKING A BREATHER

• Market regulator Sebi has written to the finance ministry, seeking an exemption from stock limits for warehouses registered with commodity exchanges
   
• Sebi Executive Director S K Mohanty said the regulator wanted exemptions for these warehouses from the norms mandated by the Essential Commodities Act
   
• As much as 1.4 million tonnes of warehousing space is accredited with the exchanges
   
• Stock limits apply in sugar and pulses. Experts say the government should only purchase the minimum quantity through minimum support prices
   
• India has storage facilities for 120 million tonnes of grain against an annual output of 265 million tonnes. Only 10 per cent of the country’s fruits and vegetables can be stored in cold chains