Committee backs move to give FMC autonomy

Forward Markets Commission is set to become a powerful regulator if the recommendations of the standing committee of Parliament, Ministry of Consumer Affairs are accepted by the government.

The Bill seeking amendment to the Forward Contract Regulations Act, intending to give more powers to the regulator, was studied by the committee and the report was tabled in the Parliament few days ago. It suggested to make FMC an autonomous regulatory body on the lines of Securities and Exchange Board of India (Sebi).

The Bill proposes FMC to take prior approval of the Central government for making any regulations. But according to the committee such precondition to take prior approval would delay decision making process and the commission would lose operational flexibility and hence the Bill should be suitably amended to give more power to the FMC .

The committee also favoured regulator's autonomy by saying that "the officials from central ministries need not be part of FMC." This is radical as even the capital market regulator Sebi has representative of the Finance Ministry on its board.

The committee says that the commission must consist of representatives of farmers and consumers group.

Thrust of the committee in the report is that futures trading have not benefited the farming community and in the name of farmers, interests of speculators are being protected and precisely because of that, options and index futures can not be allowed to be introduced, said committee report. The Bill proposes a maximum penalty of Rs 25 lakh.

According to the committee, the amount of fine should be in proportion to the gain earned by the offender or Rs. 25 lakh whichever is higher. This is a far reaching recommendation as even the Reserve bank of India cannot levy penalty of more then Rs 5 lakh.

The Committee has also ruled out the government's proposal that securities appellate tribunal will be the appellate authority for commodity futures sighting huge turnover in futures.