According to the secretary, consumer affairs, N N Mookerjee, the government is in favour of encouraging futures trading in as many commodities as possible. This will eventually substitute the element of subsidy for these commodities by way of minimum support prices for procurement or market intervention prices in case of likely distress sale of commodities. This will help government to bridge the fiscal deficit and also will enable farmers get better returns.

The food subsidy has already been raised to Rs 9000 crore in 1998-99 Budget from the revised estimate of 1997-98. The subsidy on sugar has also been raised to Rs 400 crore.

In the recently concluded workshop on commodity futures markets in the capital, last week, Sudhir Kumar, managing director, Small Farmers' Agri-Business Consortium has voiced his demand for futures trading in foodgrains. He said atpresent the country can even go for futures trading in foodgrains without much modification in the existing government policy.

The government can procure foodgrains against the declared minimum support prices to maintain its supply through the public distribution systems (PDS) in the country.

The farmers after selling their produces to the procuring agencies can put their surplus stocks for sales in the futures market.

This will enable the farmers to get better return for their produces. If such futures trading in foodgrains works well, subsequently there will be no need for procuring foodgrains against a declared procurement prices. The open market prices will stabilise and this will help both the consumers and growers in the long run. In future the market prices will stabilise and the quantum of subsidy on foodgrains will be reduced in the process.

The farmers will be encouraged to grow more foodgrains ensuring food security. The concept of quality and grading will be eventually introduced in theprocess, he said.

Kumar's views also found endorsement from several export houses in the country including Shamik Bhose of Adani Exports Ltd.The government, according to Mookerjee, is actively considering this proposal for allowing futures trading in foodgrains. Kumar had demanded futures trading in sugar. But he stated that it would be difficult to conduct futures trading in sugar under the existing policy of partial control of sugar prices, control mechanism of sugar releases through periodic quota in open market and obligation of the industry to supply levy sugar to government at reduced rates.

He said that the high powered Mahajan Committee on long-term sugar policy has already recommended phased decontrol of sugar prices and removal of levy obligations by the industry within a span of two years. He hoped that the government will accept this recommendations and pave the way for futures trading in sugar. He said that removal of periodic quota release system alone can pave the way for some futurestrading in sugar at the moment. The food processing industry in the country has also geared up to demand futures trading in several horticulture crops in the country. They have stated that futures trading in horticulture crops will help to reduce many unaccounted post-harvest losses to a considerable extent. As there are no proper marketing facilities for these produces at present, futures trading will go a long way to fill in the gap in the requirement. The Centre is also planning to promulgate a Warehouse Receipt Act to make receipts obtained from warehouses a negotiable instrument in futures trading in the country.

Mookerjee said that this concept is new to the country. Already Coffee Futures Exchange India Ltd (COFEI), Bangalore has introduced this concept by mentioning the use of this instrument in their bye-laws. The is concept apart from being a novel one imparts liquidity to the market.

Mookerjee further stated that the recent workshop held on commodity futures markets has also deliberated on theconcept of brokerage. The government has already decided to amend FCR Act to define the role of a broker. Apart from this the government is thinking of encouraging corporatisation of brokers on the lines of the stocks exchanges in the country. Corporatisation of brokers is a new concept and has picked up well in the stock exchanges, he said.

Mookerjee further stated that it has been a worl-wide experience that often some commodity exchanges become unviable, leading to their closure or merger. Some commodity exchanges go for multi-commodity trading. He said in India law does not forbid setting up of multi-commodity exchanges. It should be encouraged by the market forces. At the same time government will not force mergers of exchanges, he said. He stated that the government has decided to permit dollar denominated contracts for the proposed global cotton exchange at Mumbai and this facility will soon be extended to the international pepper exchange at Kochi. T Vidyasagar, president, IPSTA hailed thegovernment's move and stated that this will improve the operational efficiency of the global exchange. The global exchange at Kochi suffered due the currency fluctuations in south-east Asia.