Survey wants aggregators in comexes

Painting a rosy picture of the futures market in the country in the times to come, the Economic Survey on Thursday said that despite a ban on wheat, rice and pulses, trading on exchanges grew by 5 per cent last year.

Although the turnover at future exchanges has shot up to Rs 36.54 lakh crore in 2007 calendar year, the participation of farmers in such trading was not possible immediately, the Survey said, while suggesting that institutions should be allowed to act as aggregators on their behalf.

"The commodity exchanges, which have grown from strength to strength in the last few years, measured in volume of turnover as well as number of transactions, are expected to perform well in the near to medium term also," it said.

According to the Survey, the commodity bourses have risen in volumes to Rs 36.54 lakh crore in 2007 from Rs 34.84 lakh crore in the previous year, "notwithstanding the suspension of trading of wheat, rice, urad and tur".

Pointing out that the present trading norms in commodity exchanges were hindering farmers' participation in futures market, the Survey said: "Farmers can benefit from the futures market if institutions are allowed to act as aggregators on behalf of them."

The direct participation of the farmers in the commodity futures markets is somehow difficult at this stage as large lot size, daily margining and high-membership fees work as deterrent for their participation in these markets, it said.

The Survey highlighted that the daily average value of trade have improved to more than Rs 15,000 crore from Rs 13,000 in the last year. The major share of the turnover was accounted from spices, crude oil and natural gas, it added.

Multi Commodity Exchange (MCX) continued to be the largest commodity futures exchange during 2007, both in terms of turnover volume and number of contracts, it said. A total of 452.1 lakh contracts were traded on MCX, and its volume grew to Rs 27.30 lakh crore.

However, the growth of MCX commodity future index at 8 per cent during 2007 was somewhat lower as compared to the international commodity futures indices, the Survey noted.

The volume at National Commodity and Derivatives Exchange (NCDEX) dipped to Rs 7.74 lakh crore in 2007 from Rs 12.43 lakh crore in the previous calendar year, while the number of contracts declined to 12.1 lakh, it said.

The Survey said commodity futures trading in India would be further strengthened after the ordinance issued by the government that gave autonomy to the Forward Markets Commission.

It also cautioned that the futures trading should not become an instrument for pronounced speculation.

The effectiveness of commodity futures market facilitating price discovery and providing risk management depends on the participation of all the stakeholders.

"At the same time, it is important to ensure that such trading does not become an instrument for pronounced speculation," the Survey said.