Pressure rises on Govt to ban forwatd trading | india | Hindustan Times
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Pressure rises on Govt to ban forwatd trading

india Updated: Feb 15, 2007 22:41 IST

With inflation reaching 6.73 per cent, the shadow of the spiralling price rise looms large over the budget making exercise which is presently in full swing. Pressure is building up on the government to ban forward trading in essential agricultural commodities.

Forward trading in urad  and tur dal was banned by the Forward Markets Commission (FMC) last month.

"Given the frequent shortages of food grains, pulses, edible oils and sugar, leaving them open to the speculative play of futures derivatives and options, certainly exerts a negative influence on their prices," said a senior government source, refusing to be identified. He admitted there was pressure on the government to ban forward trading on essential commodities.

There has been a great increase in commodity futures trading in India in recent years, rising from Rs 1.29 lakh crore in 2003-04 to a traded value of Rs 21.34 lakh crore in 2005-06.

The Parliamentary Standing Committee on Food, Consumers Affairs and Public Distribution, in its latest report, had also recommended a ban on forward trading of foodgrains, including coarse grains, pulses and sugar.

"These commodities, need not be permitted to be traded in the commodity markets including forward and future contract derivatives and options", the committee has said.

It also noted that the intended benefit of the commodity market has not been realised by the farmers for whom the ban in forward trading was lifted.  "This trading has not produced any positive results except introducing an additional element of instability and marginalisation of the impact of the real factors. The small and marginal farmers, who constitute more than eighty per cent of the farmers' community, have been further marginalised", it said.

The Left parties have also been consistently demanding a ban on forward trading of essential commodities as they feel that it has resulted in a speculative price rise of these items.

Email Gaurav Choudhary: gaurav