Industry body CII today suggested the government to abolish commodity transaction tax (CTT) on agri-processed commodities and derivatives contracts in delivery based non-agricultural items.
It said that while agricultural commodities have been kept out of CTT, the levy imposed on agri-processed items has created an anomaly.
"It is therefore recommended to abolish CTT on agri- processed commodities which may help in establishing a more stable price regime in these commodities," it said in a statement.
After witnessing an exponential growth since its inception till FY 2011-12, the commodities futures market has seen contraction due to reasons such as suspension in trading of few items and CTT.
Chandrajit Banerjee, Director General, CII, said that there is an urgent need to safeguard the interests of stakeholders by providing them adequate hedging facilities through development of commodity derivatives market.
Securities and Exchange Board of India (Sebi) has allowed options contracts, and hedge funds to invest in commodities market.
To further support the initiative of Sebi, CII has recommended various measures which, if implemented, would go a long way in helping the market grow, it said in the statement.
The other suggestions include allowing agri-commodity derivative markets to stay open till 8 pm on weekdays, relaxation on
daily price limits on commodity futures contract.
It has also asked that the participants be allowed to hedge in all contracts up to the extent of the actual physical holding of the market participant besides permitting banks to trade on commodity exchanges.
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