House to take up FCRA in winter session

The government proposes to introduce the amendments to the Forward Contract (Regulation) Act, 1952 in the winter session of Parliament.

According to D K Mukhopadhayay, economic adviser with the Department of Consumer Affairs, the amendment will help make statutory provisions in tune with time and also strengthen and restructure the commodities market regulator, Forward Market Commission. It will also provide for setting of Forward Markets Appellate Tribunal on line of Security Appellate (SAT).

The amendments will enable FMC to become an independent and autonomous body on the lines of Securities and Exchange Board of India (Sebi).

At present, the regulator is an arm of the consumer affairs ministry. Further, the amendments will address issues like options trading in commodities, redefine commodities to include energy and weather and push forth demutualisation of regional exchanges.

"This will promote futures trading to newer heights in the immediate future," said Mukhopadhyay. "We had prepared the Cabinet note sometime back and it was sent to the finance ministry a fortnight ago. After clearance from the finance ministry, the proposal will go to the Cabinet for approval," he added.

Sources, however, say the finance ministry is opposing the Sebi move of not being the regulator of the commodities market also. The ministry, sources say, feels that Sebi, with its experience as an equity market regulator, will be better apt for the role.

However, the consumer affairs department is keen on FMC being the regulator and under the former's own wings while giving autonomy to the regulator.

On the entry of banks, he said, "Their entry in the commodities sector will allow good growth to the sector and can happen only after amendment of the Banking Regulation Act. We need to understand that growth in agriculture is related to the futures market now."

India's agriculture sector is moribund, he added and is growing at 3-4 per cent when we need at least 9-10 per cent. "The sector will then have enormous employment opportunities."

On the benefits of the futures market, Mukhopadhyay said, "Futures helps in price discovery and price risk management. This is the reason why farmers in Punjab have finally understood that shift from paddy and wheat to pulses or oilseeds is monetarily better."