Thursday July 24, 10:44 AM
India not to extend futures ban to new commodities |
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By Mayank Bhardwaj
NEW DELHI (Reuters) - India has no plans to curb futures trading in more commodities and is likely to lift a ban on four items in September, the market regulator said, despite a report recommending futures should be discouraged.
In May, the government, under pressure from its allies to control soaring inflation, suspended futures trading in soyoil, potato, rubber and chickpea for four months.
However, Agriculture Minister Sharad Pawar and an official panel probing the impact of futures trading on commodity prices said in then there was no clear link between the two.
Commodity prices had risen despite the futures ban, B.C. Khatua, chairman of the Forward Markets Commission (FMC), told Reuters by telephone on Wednesday.
The government usually consults the FMC before taking any decision on commodity derivatives.
"It has already been established that there is no link between futures trade and price rise," Khatua, also a senior government official, said, adding that the ban on the four commodities was likely to be lifted in September."
India suspended futures in wheat, rice and two varieties of lentils in early 2007.
A cross-party panel of MPs said in a report presented to parliament on Tuesday that futures trading in agricultural commodities should be "discouraged" to contain speculation, which it said generally resulted in an artificial rise in prices.
The panel gives suggestions to the agriculture ministry, which may or may not accept its recommendations.
Government officials also said the issue of banning futures came under the purview of the Consumer Affairs Ministry, which gets advice on policy issues from a different panel of lawmakers.
But commodity futures fell sharply on recommendations of the Standing Committee on Agriculture.
Khatua said the FMC has initiated a series of steps to make commodity derivatives transparent.
"In the absence of futures in commodities, farmers will have no clue about impending price movement. Farmers are losing due to restrictions on futures," Khatua said.
Early this year, India approved turning the FMC into an independent body with powers to actively police a market that has grown rapidly since futures trading was first introduced in 2002.
But parliament is yet to approve a bill to make the FMC an independent body like the stock marker regulator.
The FMC currently needs to seek permission from the Consumer Affairs Ministry for many decisions.
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