Dont blame futures trade for price rise: panel chief

Written by ASHOK B SHARMA | New Delhi, Oct 15 | Updated: Oct 16 2007, 05:57am hrs
The expert panel on the futures markets is not likely to propose a ban on futures trading in any agriculture commodity. Rather, it will propose building strategic reserves of several commodities to deal with price volatility.

Speaking to FE, panel chairman Abhijit Sen said: The terms of reference is not for deliberating whether a ban should be imposed on any tradable commodity, but to find out whether futures trading has caused a rise in prices of essential commodities in the recent past. Therefore, we would not be suggesting a ban on futures trading.

According to Sen, futures trading provides liquidity and can benefit farmers and consumers if prices stabilises at optimal levels. His comments are significant as futures trading has been criticised by all political parties as inflation spiked. The panel will also suggest means to check price volatility and determine ways that could benefit farmers.

Speaking about the reasons for the rise in prices, Sen said futures trading should not be blamed. There were other reasons like a shortfall in production, an increase in demand, lack of proper transportation as well as a rise in the cost of transportation.

According to Sen, more competitive futures trading with a larger number of players could stabilise prices and earn farmers remunerative prices for their produce.

To deal with volatility in prices, Sen argued that there was need to build strategic reserves of agro commodities, which could then be offloaded onto the market to combat an abnormal rise or fall in prices. The offloading of stock during a price rise would keep inflationary trends under control and benefit consumers.