Agricultural commodity trading on exchanges is likely to drop about 50 per cent to touch Rs 6.5 lakh crore this year as compared with Rs 13 lakh crore in 2006-07 due to the slowdown in the global economy, said Forward Markets Commission (FMC) Chairman BC Khatua.
At a media briefing here, Khatua said the bullion accounted for 42 per cent of commodity trade, and agriculture 23 per cent. He expressed hope that the government would lift the ban on eight commodities — rubber, chana, soyoil, potato, rice, wheat, tur and urad — shortly as prices had declined in the recent months. Wheat, for instance, is selling lower than the minimum support price.
Private equity funds will not be allowed to trade. The focus, instead, will be on strengthening the participation of institutional investors, he said, admitting that commodity trade did not have liquidity depth as major financial institutions, banks, mutual funds and FIIs are not allowed to participate in the markets.
Groundwork for commodity funds, like mutual funds, is complete and this is likely to take shape if the Forward Contracts (Regulation) Act is amended, he added.
Energy and metal companies pointed out that contracts for all petroleum products were not available on the Indian exchanges and the contract for crude oil referred to the contracts on NYMEX (WTI), which is not the natural benchmark for Indian refineries.