Ban on futures trade of agri items must go: NCDEX chief | The Financial Express

Ban on futures trade of agri items must go: NCDEX chief

Currently, NCDEX is providing futures trading options for around 11 commodities such as guar gum and spices such as coriander, jeera, turmeric etc.

Ban on futures trade of agri items must go: NCDEX chief
To curb inflation, on December 20, 2021, commodity exchange regulator Securities & Exchange Board of India had banned futures trade of wheat, paddy (non-basmati), chana, mustard seeds, soya bean, crude palm oil and moong for one year.

There are no valid grounds to continue with the suspension of futures trade in some of the agricultural commodities announced by the government last year, Arun Raste, MD & CEO, National Commodity and Derivatives Exchange (NCDEX), said on Wednesday.

“Continuance with futures trading ban on mustard seed, soybean and chana have deprived farmers of getting reference prices for the specific commodity,” Raste told FE.

Inflationary pressure on several commodities was because of a rise in diesel prices and global factors, he said.

He said that global edible oil prices rose because of geopolitical situations such as a decline in the soybean crop in key producing countries such as Paraguay, Argentina and Brazil, disruption in sunflower supplies from Ukraine and Indonesia briefly imposing a ban on exports.

Also Read: Futures don’t lead to unusual fluctuations in turmeric prices: NCDEX panel

“Looking at the geopolitical situation as it was prevalent a year ago, there is a huge difference now as supplies of edible oil have smoothened,” he said. India imports about 56% of its edible oil consumption.

On the price movement of chana, which has a share of 50% in the country’s production of pulses, Raste said that since the imposition futures trade ban last year, the price movement has been constant and prices are ruling around 5% (+/-) of the minimum support price (MSP) of Rs 5,230 per quintal announced for the 2021-22 season.

“There is absolutely no mechanism where anybody manipulates prices for their own benefits, which could adversely impact consumers,” he said.

Also Read: The path to better futures

To curb inflation, on December 20, 2021, commodity exchange regulator Securities & Exchange Board of India had banned futures trade of wheat, paddy (non-basmati), chana, mustard seeds, soya bean, crude palm oil and moong for one year. Earlier, mustard seed and chana (gram) futures trade was suspended on October 8, 2021 and August 16, 2021.

Following the imposition of ban on futures trade on agricultural commodities, the daily turnover over NCDEX declined by around 70% to Rs 300-400 crore from more than Rs 2,000 crore reported earlier.

“We have come back to Rs 1,000 crore daily turnover currently, as spices and guar gum volumes have picked up,” Raste said. If the futures trade ban on mustard, chana and soybean are lifted, NCDEX’s daily turnover could be `3,000 crore.

Through futures trade, farmers have got benefits, as it provides a price discovery platform, while those opposed to futures trade do not like transparency in the process, he said.

Currently, NCDEX is providing futures trading options for around 11 commodities such as guar gum and spices such as coriander, jeera, turmeric etc. It also introduced steel futures trade in the non-agri category. Meanwhile, according to a study conducted by three researchers, including one from the Indian Institute of Management (IIM), Udaipur, the suspension of futures trade in several agricultural items on the commodity exchanges last year have had no impact on the retail price volatility.

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