Pawar in global search for futures model

The government is evaluating various options for strengthening legal and institutional framework for regulating the trade in commodity futures.

The objective was to have a modern and transparent system for trading and regulation of commodity exchanges, the food and consumer affairs minister Sharad Pawar indicated at the fourth national conference of commodity exchanges .

He said the futures trading systems in place in advanced countries were being examined for this purpose.

"As a transitional measure, we would try to strengthen the existing framework to ensure orderly growth of the market till the new framework is in position", he added.

Pawar pointed out that the daily volume of trading at the National Commodities and Derivatives Exchange (NCDEX), one of the three national level exchanges, had reached Rs 2,500 crore, surpassing turnover of the Bombay Stock Exchange.

"By all indications, the volume of trading in the commodity exchanges is slated to overtake the combined trading in all securities on stock exchanges in not too distant future", he said.

The government was firm on the concept of demutualisation and on-line trading on national exchanges.

Regional exchanges would have to conform to these basic parameters within a reasonable time. Otherwise, the danger of market manipulation could not be eliminated, Pawar said.

He emphasised that the system needed to be simple enough to be understood by farmers. The benefit of price discovery at the pre-harvest and post-harvest stages, had to be made available to farmers to enable them take decisions at the time of sowing and marketing of crops.

Pawar announced the government's intention of roping in the corporate sector to invest in basic infrastructure to facilitate linkage of markets with agro-processing industry units.