FMC for lifting ban on wheat, tur futures

Seven months after the ban on wheat futures and a few pulses, market regulator Forward Markets Commission (FMC) is planning to push the government to resume futures trading in these commodities.

The government had banned futures contracts on tur and urad in January this year, followed by wheat and rice on February 28 to control inflation. The government move was prompted by complaints that futures trading in these commodities was fuelling prices.

Many studies done following the ban seem to suggest that the rise in prices was a result of supply-demand mismatches rather than futures trading. This has now prompted the FMC to ask the government to revise their earlier decision.

"We are going to write to the government to resume futures trading in wheat, rice, tur and urad. We are just waiting for Sen Committee report to be submitted," said B C Khatua, chairman, Forward Markets Commission.

The government had appointed a committee under the chairmanship of Abhijit Sen, member, Planning Commission in March this year to study the impact of futures trading on prices. The report will be submitted any time now.

The Sen Committee is widely expected to endorse the view that prices are determined by factors such as demand and supply.

The FMC, meanwhile, had appointed IIM-Bangalore to study the impact of futures on prices. 'We are banking on the interim report of IIM-Bangalore which has found no correlation between inflation and futures trading. But we are now waiting for the Sen committee recommendations," Khatua said.

P H Ravi kumar, MD, NCDEX, also called for resuming futures trade as he felt that it had no relation with price rise. "The wheat sowing season will begin by October end and farmers should have a hedging facility. Hence it is prudent for the government to permit new contracts to be launched by next month," he said.

Recently, at an international conference of world commodity market regulators, India's success in commodity futures was hailed and many countries expressed their intention to learn from India's experience.

Many delegates expressed their surprise at delisting (banning) some of the futures contracts, and called it "illogical" since India produced 10 per cent of the global wheat output.