Parliament panel set to okay Sebi-like powers for FMC

Report almost ready, likely to be presented in the ongoing winter session.

Parliament’s standing committee on food and consumer affairs is set to present its report on the proposed amendment in the Forward Contracts (Regulation) Act, 1952, in the ongoing session.

“We have finished our hearings and final recommendations have been decided. The draft is being given the final touch,” said a closely involved source.

It appears the committee has agreed to give 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, to have consented to approve forward trading in essential commodities.

“Even if the issue of allowing essential commodities’ trading is going to be debated vehemently in Parliament, we have taken a logical decision based on facts and presentations given to us by all stakeholders and experts in the field,” said sources. Earlier, panel members had strong differences on this latter issue.

“The price rise in essential commodities continues to fluctuate parallel to movements in the commodity markets and it has no linkages. It has been proven in the case of sugar and wheat,” said the sources.

As for FMC, it is expected to get full power to decide on own appointments and on recruitment of staff from government cadres or market. It can launch new products such as options and futures in the commodity markets, handle grievances and fix guidelines for markets without a mandatory consultation with the government. It will have its own fund for meeting expenses, without depending for every expenditure on the government. Besides, the committee has proposed penalty clauses for FMC to deal with wrongdoing in the commodity market.

If the Bill is passed, the ministry of food and consumer affairs will be the nodal authority for deciding on appointment of the chairman and board members of FMC, albeit with the consent of the Cabinet. Currently, it is handled by the department of personnel and training and the ministry’s role is restricted to offering its recommendations.

The committee report would, after tabling in Parliament, be sent to the ministry and thereafter to the Cabinet, before the process of taking parliamentary approval begins.

The Bill would benefit various stakeholders, including farmers, to take benefit of price discovery and price risk management, said official sources. The major amendments proposed in the 1952 law are: (a) updating of existing definitions and insertion of some new definitions; (b) changes in provisions relating to composition and functioning of FMC; (c) enhancement of the powers of FMC; (d) corporatisation and demutualisation of the existing commodities exchanges and setting up of a separate clearing corporation; (e) registration of intermediaries; (f) enhancement of penal provisions; (g) permitting trading in options in goods or options in commodity derivatives; and (h) making provision for designating the Securities Appellate Tribunal (SAT) as the appellate tribunal for purposes of the Act, also including that of levying fee.