The Hindu Business Line : NCDEX seeks I-T provision to spread risk-hedging

THE National Commodity and Derivatives Exchange Ltd (NCDEX), one of the online multi-commodity exchanges set to take off soon, has approached the Central Board of Direct Taxes for a suitable provision in the income-tax rules that would enable adjustment of the capital gains or losses made through speculation done on electronic demutualised commodity exchanges against actual business losses/gains.

"We have made a representation in this regard with the CBDT and we hope the Board may come out favourably for our request," said Mr Narendra Gupta, Chief Business Officer of the NCDEX.

Mr Gupta and his team from the NCDEX who were here as part of the multi-commodity exchange's road-show for membership drive felt such a proviso in the I-T Act would help spread the risk-hedging mechanism in the form of commodity futures trading organised through institutionalised set up. At present, speculative losses/gains are not allowed to be adjusted against any actual business gains/losses. This specific relaxation from the Board would encourage institutional hedgers getting into commodity futures trading.

The NCDEX, promoted by the four national level financial/capital market institutions of ICICI Bank, LIC, Nabard and NSE is set to start operation by end-October 2003. The exchange is expected to complete the enrolment of brokers/members by next month so that it could launch its operation in about 40 centres across the country simultaneously by October. The futures trading on the multi-commodity exchange would be initially confined to nine specific commodity of gold, silver, soyabean, soya oil, cotton, rapeseed/mustard-seed and their oil, crude palmoil, RBD palmolein.

Talking to Business Line, Mr Gupta said that NCDEX had strived to put in place a reliable/transparent system for the futures trading in specific commodities so that the futures contract trading captured the closeness of the `physical' market. To achieve this, the exchange had been interacting closely with various commodity establishments. To cite an example, Mr Gupta pointed out that in order to understand the requirements in cotton contracts for the cotton users, the NCDEX had hectic interaction with the Coimbatore-based South India Cotton Association (SICA) and the apex textile mill body like SIMA on issues relating to standard cotton contract, deliveries etc.

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