Fin Min to table FCRA bill in Lok Sabha

Bill to expire if not tabled in the present vote on account session

In a last  minute effort, the finance ministry has put up a notice in Lok Sabha  for tabling the  Forward Contracts Regulation Act 1952 in the current vote on account session.

 

According to official sources, if this bill does not get tabled in this session, it will lapse and the entire thing has to be reworked again.
 

However due to paucity of time, if the Act could not get passed, the  finance ministry has decided to strengthen the commodities market regulator Forward  Market Commission ( FMC) with financial powers and personnel.  “This is aimed at administrative strengthening of the commission”, said official sources.

 

Amendments to the Forward Contracts (Regulation) Act, 1952 (FCRA) will seek to give more powers to the commodities market regulator, Forward Market Commission (FMC), and open the door for introduction of new products like options and indices trading in the commodities futures market.

 

The standing parliamentary committee on  food and consumer affairs in its report on the FCRA bill  recommended for  giving full autonomy to the Forward Markets Commission (FMC), in line with that enjoyed by the Securities and Exchange Board of India for the capital market and had consented  to  forward trading in essential commodities.

 

Further, the   report had suggested greater autonomy for FMC to regulate spot online commodity exchanges — Financial Technologies-promoted National Spot Exchange Ltd (NSEL) and the National Commodity & Derivatives Exchange-promoted NSpot.

 

The standing committee had also recommended  for allowing financial institutions and banks, mutual funds and insurance companies to participate in forward markets so as to ensure better price discovery and lower volatility. The amendments seek to change some of the definitions mentioned in the earlier law, which would facilitate futures trading in index and also options trading in individual commodities and index. At present, in the equity markets trading is allowed in stocks, futures and index.

 

 Incidentally, the amendments to FCRA were first cleared through an official ordinance; however it lapsed as the 14th Lok Sabha could not clear the Bill due to opposition from Left parties.

 

Thereafter, the Cabinet once again cleared the amendments to the Act in September 2010 and introduced the Forward Contracts (Regulation) Amendment Bill, 2010 in Parliament. Following this, the draft Bill was referred to a standing committee of Parliament for vetting. Experts said the main beneficiaries of the reforms will be companies that produce commodities or use these as raw materials, since options would provide them with more security in volatile markets.