The Abhijit Sen Committee has recommended expanding the scope for futures trading in India as the existing volumes of trading in most agricultural commodities is still relatively low compared to international norms. It, however, has a note of caution for the government on reviving futures trading in four recently delisted commodities. ?Before the government takes any decision on delisting, there should be a clear statement of its future intentions regarding maintaining the current system of public procurement and public distribution system,? the report said.
The panel, set up last year to study the impact of futures trading on the prices of essential agricultural commodities, submitted its report to agriculture minister Sharad Pawar on Tuesday.
The government had banned futures trading in wheat, rice, urad and tur last year following demand from the UPA allies, which infact wanted a complete ban on forward trading of all essential commodities in the commodities exchanges. The report has found little linkages between price rise and trading of these commodities in exchanges. ?The fact that agricultural price inflation accelerated during the post futures period does not necessarily mean that this was caused by future trading,? he added.
However, the committee has observed that ?there are inherent difficulties if futures markets are introduced for commodities where government actively attempts to influence prices and is also a large player in physical trade?.
Alternately, it has recommended that an assessment could be made for exploring possibilities of the state-owned Food Corporation of India (FCI) acting as writer of call and put option before reopening futures trading in the major food grains.
Strongly pitching for a strong commodity market regulator, the committee said ?many misconceptions about the market will vanish if regulation is upgraded not only to protect market against any manipulation or abuse but also to ensure that the contracts on offer really do serve the objective of risk management,?.
It added commodities exchanges must revamp and create structures enabling dissemination of prices to remotest corners. ?The efforts made by the Forward Market Commission and commexes for dissemination of futures prices through various channels, though laudable, are small and inadequate,? it said. The committee has supported involvement of the regional rural banks, state agricultural marketing boards, warehousing corporations, commodity development board etc. as aggregators who would retail produce of the farmers and hedge it on the platform of exchanges on behalf of farmers.