The likely resumption of futures trade in chana, soyoil, potato and rubber after a six-month old suspension that lapsed on Sunday could pave the way for lifting the ban on the futures trade in wheat, rice, tur and urad as their prices also dropped significantly since the time the ban was imposed in 2006.
However, sources said that the futures trade in rice could be kept out of the purview for the time being as the government felt that the price is yet to stabilise in markets chiefly in southern India.
Commodities market regulator Forward Markets Commission (FMC) had, in a letter to the consumer affairs ministry, sought the lifting of the ban on wheat, rice, tur and urad because of the fall in prices and also for their complete de-linkage from spot market prices. ?We will now try to expedite the process of lifting the ban on the earlier four commodities as well,? FMC chairman BC Khatua told FE.
Prior to suspending futures trade in four commodities, the government had banned trading in wheat, rice, urad and tur in 2006 to tame rising inflation and also because of intense pressure from its former Left allies. Since then, a government-appointed committee under the chairmanship of Planning Commission member Abhijit Sen and also independent studies have confirmed that spot market prices have no clear and precise relation with future markets.
Not only have the prices of wheat, rice, urad and tur remained largely stable in the spot markets in 2008, the output has also increased manifold in 2008 and government?s own procurement touched record levels. As per latest data, India?s wheat output in 2008 is estimated to be around 78.40 million tonne, up 3.5% from last year, while rice during the ongoing kharif crop season is estimated to be at 84 million tonne, more than 1.0 million tonnes than last year.
?The ban on futures trading is hurting the farmers badly. We have been repeatedly saying that commodity prices depend on fundamentals and not on speculation. Thus the time has come to empower the FMC with sufficient power so that it can take a call on restricting or banning trading. As rice and wheat are sensitive items, we sincerely hope that the ban would be lifted soon,? said Joseph Massey, managing director, CEO, MCX.