Disagreement postpones FCRA amendment

Written by Sanjay Jog | Mumbai | Updated: Dec 23 2008, 06:23am hrs
The governments half-hearted approach to commodity futures trading has again come to the fore with the Centre again failing to consider a bill to amend the Forward Contract (Regulation) Act (FCRA), 1952 in the winter session of Parliament following disagreement among various political parties.

The amendments would have allowed commodities market regulator the Forward Market Commission (FMC) to function as an independent regulator for the commodity markets and exchanges, similar to counterpart Sebis role in respect of the securities markets.

Official sources told FE, The bill has been pushed into cold storage till the next session. The bill will be placed for consideration before Parliament in the Budget session. Apart from giving more powers to the FMC, the amendments would have also paved the way for allowing options trading in commodities.

The Centre had issued an ordinance in May to amend the FCRA Act, but the ordinance lapsed subsequently as Parliament could not provide approval to the bill.

There wont be another ordinance to amend the FCRA, sources said. Highlighting the importance of the amendments in the view of growth in commodities futures, officials said, The passage of the bill was quite necessary as the FMC regulates the operations of commodity exchanges through margins as well as limits on open positions. The bill would have given the body all the necessary powers to do so, apart from ensuring autonomy and independence of a regulator.

The amendments to the FCRA Act confers power upon the regulator to recruit officers, employees and create a FMC general fund to which all receivables will be credited except penalties, which will go to the Consolidated Fund of India. This fund will be used for the management of the affairs of the FMC and to enforce provisions of the Act.

At present, India has three national and 20 regional exchanges across India. Around 50% of the volume in the exchanges comes from bullion (gold and silver), 20% from other metals and commodities like copper, zinc and crude and about 30% from agricultural commodities (including food grains and essential commodities.