Commodities bourses opened up, too

Written by Economy Bureau | New Delhi, Jan 30 | Updated: Jan 31 2008, 06:15am hrs
The government on Wednesday decided to allow FDI up to 26% and FII up to 23% in commodity exchanges. The decision comes within a week of the governments initiative to give the Forward Markets Commission (FMC) more teeth through an ordinance. However, the cap for a single investor in a commodities exchange has been pegged at 5%. The relaxation would allow Indian exchanges to integrate with global commodities exchanges.

Under present norms, commodity exchanges can be set up by Indian promoters as companies under the Forward Contracts (Regulation) Act, 1952 to trade in agriculture products as well as other raw materials and contracts based on them. The government had made an exception while allowing Fidelity to take a stake in MCX, one of three multi-commodity exchanges in the country.

Giving autonomy to FMC and allowing FDI in commodities exchanges will definitely help boost commodities trade in the country, said Jignesh Shah, MD & CEO, MCX.

The decision to allow FII and FDI in commodities exchanges has been opposed by the CPM, a key ally of the UPA government.