What are the agri commodities in which futures trading has been banned by SEBI?

SEBI has banned futures trading in seven agri commodities, including the derivatives of two produce. The banned commodities are non-basmati paddy, wheat, chana (Bengal gram), mustard seed and its derivatives, soyabean and its derivatives, crude palm oil and moong (green gram).

Why were they banned? Since when has the ban been in force?

They have been banned because spot market prices of these commodities have been ruling higher over the last year and a half. The ban has been in force since December 20, 2021. It has been extended now for another year. The ban was initially imposed after edible oil prices doubled last year. The Centre was flooded with complaints that too much speculation, particularly in mustard seed and its derivatives, resulted in high open market prices

What are the reasons given for extending the ban?

The Centre, in particular, and SEBI have extended the ban on concerns over inflation. While surging edible oil prices resulted in imposing the ban last year, this year high rice and wheat prices have forced the Centre to extend the same.

Rice prices have increased by 7.5 per cent and those of wheat by 15.5 per cent in the past year. Though consumer inflation dropped to 5.9 per cent in November from the highs of over six per cent in the previous months, the RBI feels it is “down but not out”. Finance Minister Nirmala Sitharaman told Parliament this week that the Government is keeping a close watch over inflation.

What has been the impact of the ban?

Prices of mustard seed and its derivatives, soyabean and its derivatives, and crude palm oil have dropped. On the other hand, prices of moong and chana are ruling higher currently compared with the year-ago period as also those of rice and wheat. 

 Oilseed prices have declined mainly since edible oil supplies are no more a concern. India imports over 60 per cent of its edible oil demand. 

Has the move affected commodity exchanges?

Yes. The ban has affected the turnover of commodity exchanges. MCX has been affected by the ban on crude palm oil. NCDEX, on the other hand, has been badly hit by this since its monthly turnover halved to ₹10,053 crore in October from over ₹20,000 crore in January. It was conducting trading in the other six commodities.