Some futures tradings under govt scanner

After suspending futures trading in guar gum and guar seed last month, the consumer affairs ministry has said it would not hesitate recommending similar step on some other commodities to the forward markets commission (FMC), if it is leading to a price surge in real markets. But that step could not be taken without establishing such a link, it added.

To check the price surge in some commodities in real markets and huge volatility in futures markets, the government has decided to constitute around eight advisory committees, comprising stakeholders and experts to suggest ways to arrest rising prices.

The committees will look into price movement in all commodities which are traded in the futures exchanges, mainly essential commodities.

Besides, the secretary in the department of consumer affairs will also conduct a separate inquiry through investigation in the price movement in futures markets. This report will be submitted in the next 10-15 days.

The steps have been taken in view of unusual movement in futures price of some commodities like mentha oil, cardamom, chana, pepper and soya oil and its repercussions on spot markets.

The department will also take the help of the finance ministry to ascertain whether illegal fund transfer is being done through the commodity futures exchanges.

Consumer affairs minister K V Thomas said department was concerned on the sudden unusual price movement in some commodities in the futures markets and would take all possible steps to curb this trend, which could also include suspension of trading in some futures.

"We believe that futures market should be decided by the fundamentals of demand and supply in the physical markets and that it should be a platform for just price discovery. But this platform should not be used for hoarding or for channelling money in illegal manner," Thomas said.

Meanwhile, Thomas said price movement in futures market needs to be studied thoroughly as there have been instances when despite the suspension of trading, the price of a certain commodity had continued to rise in spot markets, while in some cases, despite drop in production, price of some commodities had fallen.

Last month, FMC had suspended futures trading in guar gum and guar seed, following allegation of cartelisation by traders, leading to a sharp rise in prices.