The government needs to work on several steps such as permitting banks to trade on commodity exchanges and weather derivative indices to boost growth of commodities market, industry body CII said. Highlighting importance of commodity markets in the economy, it said that India remains one of the largest producers in the world for most of the agricultural commodities and there is an urgent need to safeguard the interests of various stakeholders, including farmers. Adequate hedging facilities needs to be extended to all the stakeholders through development of commodity derivatives market, CII Director General Chandrajit Banerjee said in a statement. “Move to bring the regulatory control under SEBI has paved the way for next level of reforms in Indian commodity markets,” he added. To further support the initiative of SEBI, it recommended various measures “which it feels, if implemented, would go a long way in helping the commodities market grow and become more vibrant”.
It suggested the SEBI to permit agri-commodity derivative markets to stay open till 8 pm on weekdays and to remain open on Saturdays as well to match the timings of market yards (mandi). “This will enable better integration of spot market with futures market thus avoiding the risk of participants resorting to ‘dabba trading’,” it said.
Further, the chamber recommended re-launch of forwards segment which would provide farmers an alternative tool to get the best price for their produce and manage price risk more efficiently. It said development of weather derivative indices along with other sectoral indices would help participants to these instruments as a hedging tool against weather risk.
“To increase liquidity in the commodity markets, there is a need to allow institutional participation such as banks, insurance companies, mutual funds, portfolio management schemes,” it added.