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Assocham demands govt to curb speculation in agri-futures

Press Trust of India  |  New Delhi 

Industry body Assocham has urged the government to take steps to curb excessive speculation in futures trading in farm commodities, saying they fuel food inflation.

"An extreme price volatility and price hike in commodities like chana, guargum, guarseed, coriander has been witnessed during May-July," the Associated Chambers of Commerce and Industry of India (Assocham) said in a statement.

Prices of some agricultural commodities like black pepper have risen without much domestic and global demand, but due to artificial demand created by speculators and trade cartels on commodity exchanges, it said.

It further stated that futures trading in food items distort price signals and encourage speculation and hoarding, thereby contributing to food inflation.

At present, NCDEX is the leading agri-commodity exchange in the country, though small volumes of trade are undertaken in other exchanges.

According to official data, the turnover from futures trade in farm items rose by 53% to Rs 3,84,658 crore in the first quarter of the current fiscal, as against Rs 2,51,475 crore in the year-ago.

Assocham has made a representation to the Food and Consumer Affairs Ministry on speculative activity in agri-futures trade and has called for stern action against "cartelisation".

"Large investors are indulging in misuse of narrow commodity contracts as rules and regulations at present are not strict enough to stop such malpractices," Assocham Secretary General DS Rawat said.

As per the report prepared by the industry body, coriander futures price has increased by over 36% to Rs 5,590 per quintal on July 19, as against Rs 4,103 per quintal on May 12.

Similarly, chana prices have increased by 16.39% to Rs 2,883 per quintal from Rs 2,477 per quintal during the review period, it said.

Assocham observed that speculative activities are a primary source of volatility in commodity prices and controlling these activities through regulations would bring more stability to the commodity market.

It also suggested the central government should co-ordinate with state governments while taking measures against hoarding and black-marketing.

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First Published: Sun, July 31 2011. 11:54 IST