As Narendra Modi gets ready to take over as Prime Minister, investors in the commodity market are a little worried over his views on futures trading.
The reason: in 2011, a Working Group on Consumer Affairs headed by Modi had recommended a ban on futures trading in essential commodities, to control prices. The Working Group was set up in April 2010 by the UPA Government to find ways to control inflation, which had breached the 11 per cent-mark.
Considering the lack of strong linkages between the spot and future markets, the Group’s report suggested that essential commodities should be kept out of the purview of the futures market and favoured liberalising agricultural markets through organised retail.
Navin Mathur, Associate Director (Commodities & Currency), Angel Broking, said much has changed since the group raised its voice against futures trading in essential commodities.
“Though inflation is a worry now, it is not as big a concern as it was then. We have an active commodity market regulator to check speculation,” he said.
Apart from Gujarat, the Group included the Chief Ministers of Andhra Pradesh, Tamil Nadu and Maharashtra. The report suggested delisting of essential commodities such as rice, pulses and edible oils from the futures markets to contain inflation.
The working group had made 20 recommendations with 64 action points, including a suggestion to make offences under the Essential Commodities Act a non-bailable offence. To stop hoarding and black marketing of daily necessities, it recommended setting up of special courts under the Essential Commodities Act for speedy trials, besides setting up a price stabilisation fund to control volatility in commodity prices.
Ajay Kumar Kedia of Kedia Commodity Comtrade said the Prime Minister-elect has made it clear that he wants a transparent trading platform and reliable data on agricultural commodities.
The Government should allow mutual funds and financial institutions to participate in the commodity market, he said, adding that this will not only curb speculation but also stabilise prices when there is a wild swing.