The Hindu Business Line : ‘Markets will absorb commodity transaction tax’

Mumbai, June 30 It has been a testing time for commodity futures trading with the inflation crossing the 11 per cent mark. The Government suspended futures in potato, soy oil, channa and rubber. Mr Ramalinga Ramaseshan, an IAS officer of Karnataka cadre, who has recently taken over the reins of National Commodity & Derivatives Exchange Ltd (NCDEX), spoke to Business Line on various issues confronting the trade.

The exchange has indicated that it will focus on metals more. Has it yielded results?

I wish to clarify that we have taken a balanced approach towards agriculture and non-agriculture as they individually have their own roles to play in the market. We have put in a lot of effort in developing our expertise in both these fields. We do admit that there are certain apprehensions in the agricultural futures trading but we believe it is in a transition phase. The market’s response so far has been positive and I am sure going forward the benefits will percolate to the end users. We are simultaneously working in deepening our presence in the non-agriculture space. We have recently launched carbon credit futures which have been received well by the market.

Can we expect more launches in non-agriculture sector?

We are in talks with the market participants to understand their requirements. Based on the feedback, we are exploring various options. In doing so, we may have to work closely with some product associations and experts before taking the final call on contract designing. We will be launching new products, once the processes are completed.

The exchange had faced quality issues in few agriculture commodities. Have they been resolved?

The business of futures trading in agriculture involves delivery, which in turn leads to quality issues at times. We have put the checks in place to deal with quality issues. The quality issues you are talking of constitute a very small percentage of our total deliveries that are taking place. Of the 35,000-45,000 tonnes of physical delivery we handle every month, on an average 98-99 per cent go through smoothly. We are closely working with the warehouses, collateral manager and assayer to sort out these issues, and the results have been satisfactory.

There was move to de-list illiquid contracts. Is there any progress?

We would prefer to re-examine all these contracts and make them liquid. All contracts have been designed by the Exchange based on the requirements of the market. But, at times they do not work. The solution is to take a closer look and work with the market participants to make them more palatable.

Developed countries including the United States are also weighing option to restrict futures trading. What are your views?

Each market is unique on its own. There can not be one-size-fits-all solution. In India, markets have well behaved and a lot of credit goes to the Forward Markets Commission which has worked hard with the exchanges to ensure orderly trading. Price increases have been linked with economic fundamentals in the last 4-5 years.

Your views on the Commodity Transaction Tax

The market is waiting for the notification from the Government. I’m sure the market will adjust to this tax as was the case when the Securities Transaction Tax was imposed. The market will take a broader view of the potential that exists in this space.

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‘Markets will absorb commodity transaction tax’