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Mumbai , Nov. 21

KEEPING in mind the need to provide market-based risk management tools for agriculture, the Department of Consumer Affairs (DCA) has embarked upon an ambitious plan for futures trading in commodities, Mr Navin Chawla, Secretary in the Department of Consumer Affairs, said on Friday.

At a conference on `Making Commodity Markets Work: The Agricultural Perspective' organised by Business Asia here, Mr Chawla said: "Market-based risk management tools for commodities have assumed special significance in the liberalisation era."

Detailing the growth plan, he said: "First, there is growing disenchantment with the traditional approach of price and income support policies both in terms of its effectiveness as well as the Government's capacity to bear huge subsidies (endlessly).

"Second, due to reduced tariff barriers and removal of quotas, consequent to WTO obligations, price risks are not restricted to the domestic sector, but the commodity has to cope with the `imported' risk as well. Third, learning from the advanced markets, the superiority of such tools in providing risk cover has been amply demonstrated."

The plan on commodity futures broadly comprised the statutory and legal aspects, the institutional aspects and the ancillary/support mechanisms, he added.

This year, the agriculture sector in the country is slated to grow at an impressive 8 per cent, providing the foundation for a overall growth of 7 per cent, he said.

In order to increase trading volume in various commodities exchanges, the exchanges and the Forward Markets Commission (FMC) initiated a system of MoUs with the minimum benchmark targets since 2002. The impact of these reform initiatives have already started reflecting in the performance of some of the exchanges, with total value of trading crossing Rs 1 trillion during the 2002-03, he said.

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