The Confederation of Indian Industries (CII) has urged the Centre to remove Commodity Transaction Tax on processed agriculture commodities and delivery based non-agriculture commodity to reduce impact cost and attract hedgers participation.

While agricultural commodities have been kept out of the ambit of CTT, its levy on agri-processed commodities has created an anomaly and has drastically reduced hedgers’ participation due to increase in impact cost. Removal of CTT on agri-processed commodities will establish a more stable price regime in these commodities, it said.

The industry body has also urged SEBI to allow the agriculture commodity derivative markets to operate till 8 pm on weekdays and remain open on Saturdays to match the timings of mandis. This will enable better integration of spot market with futures market and avoid the risk of participants resorting to ‘dabba trading’. It will also help in better price discovery, reduce volatility and lower impact cost.

Suggesting SEBI to relax daily price limits on commodity futures contract, CII said restricting price movement on daily basis may jeopardise the very purpose of future price discovery and hedging as prices may delink from spot market and international prices.

Many market participants, the industry body said, have physical market exposure far greater than the allowed hedge limits on the exchange thus forcing such participants to remain unhedged or look at international markets.

With near-month trading limits being even smaller, hedgers are left vulnerable to the price movements and risks. CII suggests that participants be allowed to hedge up to the extent of the actual physical holding of the market participant.

It has suggested to permit banks to trade on commodity exchanges.

Calling for re-launch of forwards contracts, CII said it provide farmers with an alternative tool to get the best price for their produce and manage price risk more efficiently.

CII wants SEBI to develop weather derivative indices along with other sectoral indices which can be used by market participants and farmers as a hedging tool against risk.

Instead of arrival-based contracts, CII said futures contract should be available for entire 12 months as exports and imports of commodities goes on throughout the year.

All e-Negotiable Warehouse Receipt based financing provided to farmers should be considered as priority sector lending and banks should be mandated to provide credit to the agriculture sector compulsorily through eNWR, it said.

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