FMC seeks resumption of trading in banned commodities

The ban on trading in certain commodity futures may be revoked by October if the government accepts the recommendations of the Forward Markets Commission.

Last year, the government had delisted tur, urad, wheat and rice. The regulator suspended trading in rubber, potato, chana and soya oil in May this year.

The delisting was indefinite, while trading was suspended for four months till September 6. The moves were aimed at taming inflationary expectations as the government was under political pressure on farm futures trading.

FMC chairman B C Khatua said, “We have sent a detailed factual and analytical report to the Union government explaining the situation.” He refused to give any further details.

An executive at a leading commodities exchange said resumption of trading will take time even if the suspension is lifted in the first week of September. This is because exchanges need to seek fresh permission from the regulator. So, the actual trading can resume only some time in October.

The spot prices of the affected commodities have moved in line with the futures trend, prior to regulatory action. Experts said the government is not helping the cause of farmers, consumers or hedgers by halting futures trading.

FMC required permission from the ministry of consumer affairs for resuming futures trading in the delisted or banned commodities. It can, however, resume futures trading in the suspended commodities on its own.

In the past, FMC has been critical of the government’s move to restrict trading. On its part the government has resorted to a bank every time inflation has gone beyond the comfort zone. The parliamentary standing committee which reviewed the Bill to amend the Forward Contracts Regulation Act has opposed futures trading in farm products besides seeking restrictions on institutional players from entering the market.