Mumbai, Aug 20: The Union government is likely to give the go ahead to futures trading in 17 commodities except silver in a phased manner within the next five years as suggested by the Kabra committee.

According to Forward Markets Commission chairman VK Agarwal, in the first stage futures trading will be allowed in non-edible commodities; edible commodities will be taken up later. The focus at present is on granting permission to futures in the non-edible category which includes the recent sanction to domestic futures in cotton and jute goods and international futures in castor oil.

The remaining commodities especially the expeller and extraction oilcakes viz: castor oil cake, linseed and its oil and oilcake, cottonseed oilcake, kapas, sunflower oilcake, safflower oilcake, groundnut oilcake, rapeseed/mustardseed oilcake, copra oilcake, sesameseed oilcake, soyabean oilcake and kapas and linseed are likely to get the approval in the first phase itself.

However, the oilseeds and oils of the products mentioned above will get the nod only in the second phase, two years after the first green signal is received as they fall under the edible category.

It seems that the government is taking a cautious approach as it wants to ascertain the success of futures trading in non-edible commodities and also ensure that the traders do not unscrupulously push up or pull down the prices.

India cannot remain isolated from the practices followed the world over in commodity futures, especially when the country has joined World Trade Organisation (WTO), feels Forward Markets Commission chairman VK Agarwal.In line with the agreement, the country will have to remove restrictions on imports of goods. With the removal of restrictions a stream of foreign products is expected to enter the domestic market.

At that juncture forward markets will prove to be the only mechanism to check unscrupulous dumping in terms of prices. It will be a handy mechanism to streamline the entire marketing channel.

Allowing futures trading in commodities particularly in which the country has sufficient domestic supply and which has a history of large fluctuations in prices will become pertinent when WTO starts operating in full swing.Moreover, private trade plays a major role in the marketing of these commodities. Hence they need a mechanism to minimise their risk from adverse price fluctuations. And forward contracts fulfil that need.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.