Also, BOOE has sought permission from the Forward Markets' Commission (FMC) to set up satellite trading rings outside Vashi (Navi Mumbai) back to BOOE's old Mumbai exchange premises where it used to conduct futures trading till early '60s. The government banned trading in futures thereafter.

Further, the BOOE has also sought to setting up trading rings in Ahmedabad, Jamnagar, Bhuj (in Gujarat) and Hyderabad by offering the players their regional flavour of the product. For groundnut and cottonseed are the flavour of Gujarat, while sunflowerseed is that of Hyderabad.

Both these permission are seen as a major catalysts that the BOOE hopes will give a fillip to the current negligible interest in commodity futures among the traders and importing community.

Even the World Bank's representative, Lamon Rutten, in his presentation last month on the subject of `Moving India's Commodity Exchange Industry Forward' had emphasised that the tax treatment of commodity futures trading business has to be changed, if we really wish to develop the market.

"We have approached the government to rationalise the income tax rules that will permit offsetting of losses in futures markets," said BOOE president PM Chheda. "Now that online trading is in place at most of the commodity exchanges, there is little reason for the government to fear of unscrupulous elements reporting wrong deals to claim benefits."

"If permitted, these will help us in attracting speculators from markets, both within and outside the oilseeds complex," Mr Chedda said.

BOOE has been permitted to offer trading in futures of groundnut, castorseed and its oil, sunflowerseed, RBD palmolein, cottonseed which it offers at its Vashi exchange complex. There are other oilseeds and oils which too are intended to be offered for futures trading.

However, for various reasons, the daily trading volumes at BOOE continues to remain too low at around 3 to 5 contracts, thanks to the lucrative thriving parallel markets in Mumbai and Gujarat where there are no tax hassles.

According to Mr Chheda, hedging has become inevitable for all section of players in the oilseeds complex. However, because of this lacuna in the income tax rules, players tend to revert to the lucrative parallel trading floors, where no tax is applicable.

Section 43 (5) of Income Tax Act that differentiates between hedging and speculation, says that if a transaction is done in order to guard against possible loss due to fluctuation in prices, it will not be treated as speculative business. Hedging means the trader/importer needs to have equal quantity of outstanding business, which in the normal course of business is simply impossible and therefore, the element of speculation which is not acceptable to the tax authorities.Prior to April 1, 1953 there was no difference between speculative and non-speculative business so far as the right to set off or carry forward loss was concerned. Thereafter, an amendment in the Income Tax Act was introduced which differentiated between the speculative and non-speculative business so as to curb unscrupulous claims of set off as speculative losses to manipulate and reduce taxable incomes by generating fictitious entries in the books of accounts.

In order to promote futures trading in permitted commodities BOOE is interacting with importers, exporters, producers and other segments of the trade. "And majority of them point to this one regulatory bottleneck," a BOOE official said. At a time when the government is striving hard to make the commodity futures market vibrant, the BOOE claims, it can assure that if the tax issue is sorted out, majority of importers, exporters and producers would turn to formal commodity exchange and participate in commodity futures which in turn will help the futures trading volume to go up.

Also, the electronic trading format insisted by the government and the FMC will prevent unscrupulous persons traders, importers taking advantage with false deals. The Income Tax authorities will therefore, be able to identify the real deals and allow the set off of losses if any.