As a first step, besides nominating its own senior official, it has appointed on the boards of directors of the Bombay Oilseeds & Oils Exchange Ltd (BOOE) and the East India Cotton Association (EICA), a reputed agricultural economist from Mumbai University.

This is indeed a welcome move, as it would enable the managements of these exchanges to seek more objective views from independent economists on trading and other trade related issues influencing commodity prices, and through those prices the pattern of production, distribution and consumption.The FMC has also requested BOOE to reconstitute its board of directors to provide for greater representation to ``corporates'' as representative of its variousmembership panels like crushers, exporters and dealers.

In fact, it has even proposed to the Exchange to create a ``General'' panel of non-trading members such as banks, financial institutions, trade bodies, etc and provide for 2 seats on the board to that panel.

This is not all.It is understood to have as well suggested to the Exchange to include on its governing body representatives of co-operatives, farmers, as also professionals and academicians who may not be members of the Exchange. These are no doubt quite useful suggestions.

To be sure, BOOE may not be averse to these healthy proposals. For, while pleading for self-regulation in commodity exchanges, the Exchange has gone on record, in its memorandum submitted to the Kabra Committee in November 1993, to state unambiguously that ``the recognised associations should be encouraged to co-opt on the boards of directors interests not otherwise represented in the membership of the exchange, such as farmers, co-operative societies, consumers, etc.

BOOEhas then even opined that ``the associations may further be required to nominate on its boards outside academicians and other intellectuals, including reputed journalists, so that along with the futures market the regulatory policies and decisions of the governing bodies of the recognised associations also remain transparent.''

Of course, these valuable suggestions were then offered in the fond hope of obtaining greater latitude and freedom in self-regulation of its futures markets, which has still remained a dream for the commodity exchanges in the country.

As it is, under the FC(R) Act, the recognised associations actually empower the central government to appoint as many as four directors on their governing bodies to represent interests not directly represented through their membership.

Perhaps, therefore, without waiting for the recognised associations to co-opt on their boards non-trade representatives, the central government may take initiative in the matter and invoke its powers to nominatesuitable independent experts from outside the government to facilitate healthy decision- making in the overall interests of the commodity economies by the managements of the exchanges.

Such nominees may include representative of both farmers and consumers.More imperative and urgent, however, is the need to strengthen the economic rationality and transparency in the decision-making process of the FMC itself.

For that purpose, FMC must develop a strong research-oriented approach so that its decisions acquire credibility and sub-serve the cause of futures trading by improving the efficiency of risk management and price discovery.In this context, the central government has no doubt taken a right step by elevating the status of chairman and members of the commission so as to draw to these positions high ranking and experienced civil servants.

In fact, after many years, during which FMC functioned as almost a ``one man show'' with only chairman constituting the Commission for all practical purposes, thegovernment has recently appointed two full-time members as well.

This is undoubtedly good, but still not good enough. Under the FC(R) Act, the FMC can have a maximum of 4 members, including chairman. It seems that instead of nominating all the members of the Commission from the bureaucracy, it would be desirable for the government to appoint, at least one reputed agricultural economist of proved research experience with specialisation in commodity marketing as a member.

In the past, the Commission had the benefit of economists like WR Natu, R Doraiswamy and even a non-official like SV Kogekar, a retired professor of politics and economics and Ferguson College, Pune.

The appointment of competent economists as members of the FMC would bring into focus an unbiased independent outlook into the regulatory and development activities of the Commission.

That would also help the FMC to develop a strong research and intelligence wing - so very much essential in the present era of information technology andknowledge based power.

It goes without saying that FMC also needs to recruit young research scholars as economists on its staff. That would lay the foundation for more scientific and pragmatic decision making in the FMC and enable it to undertake research studies to assess the economic utility of futures markets in different commodities.

Incidentally, it may not be out of place to mention here that the Commodity Exchange Act of the United States (whose regulatory practices we are now zealously trying to emulate), specifically enjoins that in nominating persons for appointment as commissioners on the Commodity Futures Trading Commission, ``the president shall (i) select persons who shall each have demonstrated knowledge in futures trading or its regulations, or the production, merchandising, processing or distribution of one or more of the commodities or other goods and articles, services, rights and interests covered by this Act, and (ii) seek to ensure that the demonstrated knowledge of the commissionersis balanced with respect to such areas.''

Not surprisingly, most of the commissioners of the US Commodity Futures Trading Commission are drawn from outside the government departments. Perhaps it may be advisable to incorporate a similar provision in the FC(R) Act.

Meanwhile, under section 25 of the FC(R) Act, the central government can at best establish an advisory committee drawn from representatives of other economic ministries like those of finance, agriculture, commerce and industry, and also appoint on that committee experts and economists from the academic institutions as well as the private sector.

The representatives of the consumers and farmers may also be nominated on such committee to advise the government on development and regulation of futures markets.

The meetings of this committee should be held at regular intervals to review periodically the working of futures markets and to advise the government on improving their working and economic usefulness.

The necessary rules for thatpurpose may be framed under section 28(f) of the Act. That would go a long way in strengthening the FMC and improving its image and working.