Last week, the Cabinet secretariat endorsed the finance ministry's long-held view that commodity derivatives, being financial products, should be under the ambit of the ministry. Once the FMC comes into its fold, the Finance Ministry will take a call on whether to keep it as separate entity or make it a division of the capital market regulator, Securities and Exchange Board Of India (Sebi), sources said. Sebi is under the administrative control of the Finance Ministry.
The consent of the consumer affairs ministry to take the FMC out of its purview came amid an escalation of a settlement crisis at the National Spot Exchange Limited (NSEL) after members defaulted on the first pay-out on August 20. Although the FMC regulates the commodity futures market, it was empowered on August 6 to oversee the settlement process at NSEL.
Apprehensions intensify that members may default on payment again, as against the next scheduled pay-out of Rs 174.72 crore on August 27, only Rs 8.50 crore had been received as of Saturday.
In 2009, the Finance Ministry had also suggested bringing in the FMC under its control but this didn't happen due to the strong resistance of the consumer affairs ministry as well as the commodity futures market regulator.
The FMC is now expected to be brought under the ambit of the finance ministry from September. As per the rule, upon the advice of the Prime Minister, the President can approve the change in the allocation of business of a particular ministry to another for better functioning.
At present, the consumer affairs ministry oversees the functioning of the FMC. Placing the FMC under the finance ministry, which currently oversees the functioning of several regulators such as Sebi, Irda and PFRDA, will result in better co-ordination among watchdogs, sources said.
Of the scheduled pay-out of Rs 174.72 crore, NSEL could settle just over Rs 92 crore on Tuesday, a day when it also removed its MD & CEO Anjani Sinha and six other top executives.