The Hindu Business Line : `Futures trading must serve larger social purpose'

It was with the objective to deliver benefit to growers through price discovery and price risk management that commodity futures trading was thrown open in terms of the recommendation contained in National Agriculture Policy released in the year 2000.

However, if the objective is not served, it could invite public ire, according to Mr Rajiv Agarwal, Member, Forward markets Commission, who was sharing his thoughts on the market regulator's perspective at Commasset 2006 conference here on Sunday.

Following sharp increase in the open market prices of essential food items such as wheat, pulses, sugar and edible oil, the Union Government had announced several measure to contain inflation including ban on exports, liberal imports, imposition of storage limits and so on.

"Some government steps may appear restrictive, but there is a larger social purpose behind these decisions", the speaker asserted.

The regulator's concerns include financial integrity, market integrity and correlation between physical and futures markets.

Unlike the securities market where everyone is happy with the market going up, in the commodities market, interests of both producers and consumers have to be balanced.

If prices decline to low levels, producers' incomes would be hit, while consumers' interests would be affected with undue price rise.

Mr Agarwal urged market participants to keep this larger picture in mind, adding that the regulator has to ensure no manipulation took place in the market.

The commodity conference ended with a price outlook discussion on energy, base metals, bullion and agricultural products. Integration of the Indian market with the global market means that domestic prices would be impacted by global factors.

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`Futures trading must serve larger social purpose'