The Hindu Business Line : Boost to sentiments likely as commodity transaction tax goes

Mumbai, July 6 The quiet burial of yet-to-be-implemented Commodity Transaction Tax (CTT) has boosted the confidence of the commodity futures market, which was plagued by frequent bans on agriculture products. The Government recently suspended futures trading in sugar as the prices zoomed, stocking up concern over inflation.

Mr Anjani Sinha, Director of MCX, said the removal of CTT will stimulate huge investment in the warehousing sector since the uncertainty of commodity market viability has been removed and now it will be at par with the top 25 global commodities exchanges that constitute 99.99 per cent of the world’s exchange-traded commodity derivative volume.

“The announcement will put the Indian commodity market ecosystem on par with international exchanges with respect to cost of hedging, thereby fulfilling the Government’s vision of making Indian commodity derivative market competitive on a global canvass,” he said.

In the Finance Act 2008-09, former Finance Minister, Mr P. Chidambaram, had proposed to levy CTT at 0.017 per cent of the value of transaction, but was never implemented due to stiff opposition as it was expected that CTT would make transaction in commodities much more expensive.

The Government had proposed to earn revenue of Rs 10,000 crore a year through CTT, said Mr Tarun Satsangi, Assistant Vice-President, Bonanza Commodity Broker.

Though CTT was not levied, it was a sword always hanging over the head, said Mr Anil Mishra, Chief Executive Officer of National Multi Commodity Exchange and added abolishing CTT and retaining STT (Securities Transaction Tax) shows that the Government is now looking at commodity exchanges with a reformist angle.

However, many experts felt that it would have been much better if the Government has paved way for the clearance of Forward Contract Regulation Act (Amendment) Bill, enabling more power for the commodity market regulator Forward Markets Commission.

Mr R. Ramaseshan

Mr R. Ramaseshan, Managing Director, NCDEX, said the Economic Survey reiterated the need to lift the ban on futures contracts to restore positive market sentiments and enable the price discovery and price risk management facilitated by the exchanges.

“We are hopeful that all this is a positive move towards the amendment of the FCRA, which would go a long way in proving depth and diverse participation in these markets,” said Mr Sinha.

“We expect now that the new FCRA would also be passed and more reforms would be seen in the commodity exchange business,” said Mr Mishra.

Mr Saurav Arora, Senior Vice-President, Jaypee Capital, with the removal of CTT, more market participants will enter the commodity market, making it efficient for the natural hedgers to hedge their cost effectively.

More Stories on : Taxation | Commodity Markets | Budget

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