Govt urged to lift ban on essential futures

Agriculture reformist Shankarlal Guru has appealed to the Union Minister of Agriculture Sharad Pawar to lift the ban on futures trading in essential commodities and encourage national spot exchanges.

He termed futures trading as "a messenger for the farmers". "In the current season, wheat sowing is 38 per cent more than double in Gujarat. Banning the futures would mean killing the messenger. The farmers benefited from the futures as is evident from the increased sowing."

If in the future, prices quoted on futures exchanges are high, then farmers can also sell their produce to ensure higher realisation at the time of sowing or produce. "No farmer sold their produce when the futures prices were high as they were not familiar with the procedures in futures exchanges," Shankarlal, who is also the western zone chairman of the Rashtriya Kisan Dal.

All three nationwide futures exchanges have proposed to start national spot exchanges. These exchanges will be more efficient, transparent and provide better realisations for farmers' products than at the mandis. Currently, farmers can sell their produce only at Agricultural Produce Marketing Committee (APMC) mandis and not directly.

If the farmers sell their produce on national spot exchanges, they will get the prevailing national market prices. But for this states will have to reform their APMC Acts along the lines of the model APMC Act enacted by the Union government.

Shankarlal had earlier suggested that agriculture marketing laws including APMC Acts when he was the chairman of a committee on agriculture reforms in 2001. Next day delivery system in spot exchanges as explained above is seen as a forward trade and need some legal clarity. Guru recommends Forward Contract Regulation Act should be amended if required and national spot exchanges should be permitted. His contention is settlement of commodity futures generally do not result in deliveries and that is why farmers are keeping away.

If national spot exchanges are in place, it will boost the delivery-based selling and eventually settlement will take place in futures market also, which will benefit the farmers.

Maharashtra, Rajasthan and Madhya Pradesh have reformed their APMC Acts so private traders can buy directly from the farmers and inform the nearest APMC of the purchases. "Such competition will improve efficiency of the present APMCs," Guru said. He has also recommended that agriculture have a separate budget like the railways and pension for farmers above age of 60 years.