SEBI to regulate plantation companies

The need to regulate plantation companies arose as these companies did not come under the ambit of either the SEBI, Department of Company Affairs (DCA) or Reserve Bank of India (RBI).

The government has been concerned about the booming of plantation companies, which were offering high rates of interest not consistent with normal returns in such activities.

At present there are some 3,600 odd plantation companies registered with the DCA, with the maximum concentration in Delhi and Mumbai.

The government has felt it necessary to put in place an appropriate regulatory framework to ensure that the investors make investment decisions with full knowledge of the risks involved, the statement said.

It said SEBI would formulate draft regulations, which would be made available for public discussion. The investors who have invested in such schemes as well as entities running such schemes will be requested to give comments on pertinent matters to SEBI so that the market watchdog can formulate appropriate regulations.

Plantation companies issue agro bonds and other deposit schemes at high rates of interest and promise to produce and market plantation products like teak wood.

The units issued by these companies are not classified as securities under the Securities Contract (Regulation) Act, 1956, or as deposits under the companies act (amended), 1974 and so, were not monitored by any regulatory authority.