FMC mulls lifting ban on futures trade of tur, urad and rice

Written by Sandip Das | Panjim | Updated: Feb 21 2014, 05:48am hrs
Commodity market regulator Forward Markets Commission (FMC) may soon lift the ban it had imposed in 2007 on futures trading of key agricultural items such as tur (pigeon peas), urad (black gram) and rice.

We are favourably considering the proposal to lift the ban imposed on futures trading of tur, urad and rice within a month, Ramesh Abhishek, chairman, FMC, told reporters on the sidelines of Pulses Conclave organised by India Pulses and Grains Association (IPGA).

Ramesh noted that chana is already traded in the commodity exchanges, including NCDEX, ACE and others, and there is no reason why tur and urad should be banned from the futures trading platform.

He also said the regulatory framework governing commodity futures trade has improved since 2007, which has prompted the commission to consider lifting the ban on agri commodities.

The FMCs move to lift the six-year ban on futures trade of tur, urad and rice comes at a time when the country is all set to harvest record foodgrain production in excess of 263 million tonne (mt).

According to the second advance estimate released last week, rice production is estimated at a record 106.1 mt against 105.2 mt reported in 2012-13.

Industry sources told FE that because of record output last year, the countrys import of pulses would decline to 2.7 mt in 2013-14 from 3.8 mt reported in the previous year.

The government had banned futures trading in commodities like urad, tur, wheat and rice due to spike in prices of essential food items, leading to inflation in early 2007.

Subsequently, a committee headed by Abhijit Sen, member of the Planning Commission, said in its report that it is clearly illogical to claim that futures trading will generally tend to improve prices received by farmers and yet maintain that futures trading can never contribute to inflation of spot prices.

Meanwhile, Samir Shah, managing director of NCDEX, said the exchange would be seeking the FMCs nod for launching bajra and chilli futures contracts.

NCDEX and IPGA on Thursday signed a Memorandum of Understanding to work in collaboration for increasing the effectiveness of trade tools, including lifting of trading restrictions through continuous dialogue with regulator and policymakers.

The MoU envisages improvement in trade efficiency, price discovery in pulses and grains and carrying

out crop surveys and field studies as well as educating traders about the advantages of using the transparent, online spot platform NSPOT.