CTT drags commexes biz by 41% in July; MCX sees 37% fall

Turnover of commodity exchanges dropped by 41% to Rs 8,83,765 crore in July, mainly on account of the imposition of commodity transaction tax (CTT) and a sharp dip in prices.

The exchanges had done business worth Rs 14,93,059 crore in the same month last year, according to the Forward Markets Commission (FMC).

Analysts at commodity brokerage firms attributed the sharp fall in the turnover to poor participation of different stakeholders in the futures market due to CTT.

"The government has not earned big revenue by levying CTT. The collection of Rs 80 crore CTT is nothing. Rather, the purpose of the futures market, that is price discovery process and hedging, has been defeated," brokerage firm SMC Comtrade Chairman and Manging Director D K Aggarwal told PTI.

Trade volumes have not only declined in bullion and base metals but also in processed food items like refined soya oil and guar, he added.

CTT of 0.01% has been made effective from July 1 on the futures trading of non-agri commodities and processed foods. The government has exempted 23 agricultural commodities from the new tax.

"Business has been affected due to CTT. There is a need to relook at this issue," said an analyst at Hyderabad-based brokerage firm JRG Wealth Management.

"The other reason is that there was consolidation of commodity prices especially metal and bullion that led to lower trade volumes," added Harish Gallipelli of JRG Wealth.

As per the FMC data, the turnover has fallen sharply on all five national bourses barring NMCE, where the business has risen by 72% to Rs 11,921 crore in July, as against Rs 6,940 crore in the same period previous year.

However the turnover at MCX -- which has more than 80% share in the overall futures market -- has declined by 37.36% to Rs 7,76,124 crore in July from Rs 12,39,043 crore in the year-ago period.

The business at NCDEX, leading agri-commodity bourses, fell by 60.36% to Rs 84,209 crore from Rs 2,12,487 crore in the review period.

Among the upcoming national bourses, the impact of CTT was cascading on ACE Commodities and Derivatives, which saw its turnover falling by whopping 88% to Rs 3,002 crore in July from Rs 24,951 crore in the same month previous year.

At ICEX, the turnover declined by 23% to Rs 4,059 crore from Rs 5,260 crore in the review period.
 
Universal Commodity Exchange, which commenced trading in April this year, reported the turnover of Rs 2,908 crore in July this year.

There are 21 commodity bourses in the country, of which six of them operate at national level.