The Hindu Business Line : Commodity futures trading may get 3-month reprieve

Mumbai April 18 There are strong indications that the Expert Committee constituted under the Chairmanship of Prof Abhijit Sen to examine the impact of futures trading on price rise in agricultural commodities in recent times may get an extension by at least a couple of months, if not more.

The committee has commenced its exercise; stakeholder consultation has begun.

But it is unlikely to be able to complete the consultation process anytime soon, given the enormity of the task.

Also, it seems likely that until the panel makes its recommendations, the policymakers may not tinker with commodity futures trading.

So, market participants can breathe easy for the next three months.

More importantly, the Bill to amend the Forward Contracts Regulation Act will remain in limbo for some more time. The Government may be wary of bringing up the amendment Bill until the dust over the impact of futures trading settles down. The amendment Bill has already been hanging fire for about two years.

Announcement of the formation of an expert panel was made on February 28 and names of panel members were finalised in early March.

In addition to examining the impact of futures trading on wholesale and retail prices of agricultural commodities, the committee will also suggest ways to minimise the impact.

There will also be recommendations on how to associate farmers with the futures market.

The expert committee's terms of reference are highly restrictive. Within the agricultural system, there are several sub-systems.

The phenomenon of inflation has many dimensions. It may not be possible to isolate the role or contribution of futures trading.

At the same time, it has to be conceded that rampant speculation contributes to undue price rise; a price rise not justified by demand-supply fundamentals.

There is a strong need to expand the scope of the expert committee's terms to examine whether or not futures trading is desirable in a shortage economy; and whether Indian agriculture in general, and farmers and/or consumers in particular, have benefited in the last three years.

Unless there is a consensus on this issue, the `political risk' or `policy risk' to this market will continue to lurk.

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