The Hindu Business Line : No data to link futures trade impact with grain prices: Panel

Mooting status quo: Prof Abhijit Sen, Chairman of the Expert Committee set up to study the impact of futures trading in foodgrains, presenting the final report to the Union Minister for Food and Agriculture, Mr Sharad Pawar, in the Capital on Tuesday. –

Our Bureau

New Delhi, April 29 The panel set up under the chairmanship of the Planning Commission Member, Dr Abhijit Sen, to study the impact of futures trading on commodity prices has not found any firm link between futures trading and commodities prices in the spot market. The panel has not expressed any view on the delisting of commodities done in 2007, saying it was not a part of its terms of reference.

Statistically impossible

Pointing out that it is statistically impossible to make futures exchanges responsible for the price rise, Dr Sen said the commodities exchanges should be given benefit of doubt in case of any abnormal price rise. He was speaking to reporters after submitting the report to Agriculture Minister Mr Sharad Pawar.

“Indian data does not show any clear evidence of either reduced or increased volatility of spot prices due to futures trading,” the committee said, pointing out that such markets help in price discovery and provide risk management.

“One of the reasons for the acceleration of increase in the post-futures period was that the immediate pre-futures period had been one of relatively low agricultural prices…a part of acceleration could be due to recovery of the past trend,” it said.

It has called for strengthening of exchanges and the regulator, Forward Markets Commission (FMC), allowing farmers greater access to information. The efforts made by the FMC and commexes for dissemination of futures prices, though laudable, are small and inadequate, it said.

It has also called for strengthening of spot markets, calling upon States to operationalise the model APMC Act soon.

SPOT EXCHANGES

Calling for bringing in inter-state spot trade under the regulation of a Central authority, the panel said there is a need to promote integrated national spot exchanges. The Committee has also called for allowing farmers to hedge by allowing “only simple options in agri-commodities” till the market attains maturity.

The cost of accessing these markets for genuine hedging needs of farmers should be minimised by waiving transaction fee or even by granting subsidies. The committee has said possibilities should be explored to make the agencies implementing minimum support price (MSP) like FCI act as the writer of call and put options in the agriculture market.

‘MAINTAIN BALANCE’

Even though the committee has not taken a view on the ban imposed on futures trading in 2007 of commodities including rice and wheat, Dr Sen said a status quo on the wheat and rice futures trade should be maintained as the supply-demand balance should not be disturbed.

He said it was unlikely that wheat would be brought back into futures platform, despite good production prospects and easing global prices. “The balance in wheat should not be disturbed,” he said.

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