Uncertain future for futures trade panel

The fate of the Abhijit Sen Committee, set up by the government to study the impact of futures trading on wholesale and retail prices of agricultural commodities, hangs in the balance with the committee neither submitting its report nor seeking a further extension even as the second extension expired on August 2.

Sen, who is a member of the Planning Commission, said the futures trading report had not been completed since he was busy finalising the 11th Plan document on agriculture. "Planning is my first priority," he said.

A commitee member added that a request for a third extension had not yet been made. "A preliminary draft is ready. It has to be cleared by the chairman and then circulated among members for their comments. After that we will need a few meetings to finalise the report," he said.

"If the committee favours futures trading of essential commodities as expected, then there will be pressure on the government to amend the Forward Contracts (Regulation) Act, 1952, thus inviting more trouble for it. That is why the committee is delaying the report," another source in the know of the development added.

The FCRA (Amendment) Bill, 2006, has been pending for about a year. When passed, the legislation would pave the way for introduction of options trading in commodities, besides facilitating the entry of FIIs and mutual funds into commodity trading. It would also strengthen the commodity markets regulator - the Forward Markets Commission (FMC) - by giving it more teeth to regulate trading.

"The steps taken by policy makers over the last year have adversely affected market sentiment and confidence. They have impacted trading volumes on commodity exchanges, including ours. There has been a sharp fall in the share of agricultural commodities in total futures trading from 54.3 per cent in 2006-07 to 35.4 per cent in the current fiscal. An early report clarifying the committee's view will help rebuild market confidence," said P H Ravikumar, managing director & chief executive officer, National Commodity and Derivatives Exchange (NCDEX).

The committee was instituted on March 2 this year to examine whether and to what extent futures trading had contributed to price rise in agricultural commodities in recent times. It was set up after Left parties raised the issue of price rise in essential commodities. The original deadline for submitting the report was May 2, failing which it was revised to July 2, and then again to August 2.

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IN LIMBO

January 23: Ban on futures trading in urad and tur

February 28: Ban on futures trading in wheat and rice

March 2: Abhijit Sen Committee on futures trading set up

May 2: Two-month term of the committee ends, committee seeks another two-month extension

July 2: First extension expires, committee seeks second extension for one month

August 2: Second extension expires, committee fails to submit report