The Hindu Business Line : Commodity futures panel report may be ready soon

Chennai, Nov. 24 The report of the Abhijit Sen Committee, which has been asked to look into whether the futures in foodgrains contribute to the rise in their prices, is likely to submit its report in a month, Dr Kewal Ram, a member of the Committee said on Friday. He refused to divulge any details about what the report might contain.

Recommendations

The Committee’s report, which was first expected to submit its report in May and has since received several extensions of the deadline, is much awaited because its recommendations would have a bearing on many aspects of the futures market for agri commodities.

For instance, it could lead to lifting of the ban in futures trading in rice, wheat, tur and urad, which the Government had brought in March, in deference to the political belief that the inflation-feeding price-rise of these commodities was caused by the futures market.

Mr P.H. Ravikumar, Managing Director, National Commodities & Derivatives Exchange Ltd, has said the loss of volumes would force the exchange to move away from agricultural commodities.

Consequently, farmers who are able to make use of the exchange will lose the benefits.

Secondly, the Committee’s report could influence any decision on allowing FDI into commodity exchanges.

Weighing up hedging

Meanwhile, the Forward Markets Commission has said it favours allowing foreign companies to participate in the commodities futures markets.

The FMC Chairman, Mr B.C. Khatua, said: “We are of the opinion that international players should be allowed to hedge in the futures markets.”

He added that the Commission was working with the Government towards this end.

(This is apart from allowing foreign companies to take equity stakes in the commodity exchanges, which is also a matter under the consideration of the Government.)

Promotion drive

Mr Khatua was here in connection with a meeting of the Commission with the members of commodity exchanges.

The meeting discussed measures to popularise the use of commodity exchanges. They include seeking the help of opinion makers among farmers, encouraging farmers co-operatives and NGOs to become aggregators (to pool agricultural produce to a marketable size and take positions on the exchange) and introduction of courses on commodity markets in colleges.

He said that the Forward Contracts (Regulation) Amendment Bill was only awaiting the President’s consent, to become an Act.

Asked if making warehouse receipts as negotiable instruments as envisaged by the Bill would help farmers, Mr Khatua noted that a breed of warehouses with good systems to grade commodities and with reputation would need to develop first, for warehouse receipts to be accepted as negotiable instruments.

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