The consumer affairs ministry plans to place the draft Forward Contract (Regulation) Amendment Bill before the new co-ordination committee of the United Progressive Alliance (UPA) to evolve a consensus on the proposed legislation.
Officials said this had become necessary after the Trinamool Congress (TMC) member and Railway Minister, Mukul Roy, wrote a letter to Prime Minister Manmohan Singh to put on hold any discussion on the Bill in the Cabinet unless a broad consensus over its provisions is evolved. TMC, the second largest party in the UPA, also wanted consultations with states before referring the Bill — aimed at giving more power to commodities market regulator Forward Markets commission (FMC) and introducing more products — for consideration of the Cabinet.
The Bill, revised after Parliament's standing committee vetted the earlier legislation, was deferred by the Cabinet for the fourth time on August 17, after being scheduled for discussion.
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This was the fourth time that the FCRA Bill was placed before the Cabinet and could not be passed because of opposition from the TMC.
“It conveys a very wrong message to all stakeholders,” a senior government official said. “Hence, we have suggested that the Bill should be first discussed at a meeting of the UPA co-ordination committee. Thereafter, it should be brought before the Cabinet, only if there is a consensus.”
The co-ordination committee is expected to meet this month to deliberate on all contentious issues between the Congress and its alliance partners. The FCRA Bill is expected to figure prominently in the discussions, officials said.
They said the TMC is of the view that the Bill in its present form would be detrimental to the interests of small and marginal farmers and the common man, and would benefit only big and affluent farmers.
The party has also said all essential commodities, per se, should not be allowed to be traded in the futures markets as the common man, who is not connected with agriculture production or marketing, is not likely to benefit from the derivative market.
The letter also gave the example of price movements in commodities traded in the National Commodities and Derivatives Exchange of India in soya seed, chana and wheat as a case in point.
Officials said the issue of approaching the UPA panel to discuss the TMC’s objections has also been conveyed to the prime minister.
Besides giving more power to FMC, the Bill aims at facilitating the entry of institutional investors and introducing products for trading such as options and indices. The amendments seek to change some of the definitions mentioned in the earlier law, which would facilitate futures trading in index and also options trading in individual commodities and index. At present, trading is allowed in stocks, futures and index only in the equity markets.
The amendments were first cleared through an official ordinance. However, it lapsed as the 14th Lok Sabha could not clear the Bill due to opposition from the Left parties.
Thereafter, the Cabinet once again cleared the amendments to the Act in September 2010 and introduced the Bill in Parliament. Following this, the Bill was referred to a standing committee of Parliament for vetting. Experts said the main beneficiaries of the reforms will be companies that produce commodities or use them as raw materials, as options would provide them with more security in volatile markets.
