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Keep out agri commodities linked to India's food security: Swaminathan

He wants the Government to keep out agricultural commodities linked to India's food security from the ambit of forward trading, as it is speculative in nature, reports Sutirtho Patranobis.

india Updated: Dec 22, 2006 20:55 IST

MS Swaminathan, a foremost expert on agriculture, wants the Government to keep out agricultural commodities linked to India's food security from the ambit of forward trading, as it is speculative in nature.

Swaminathan, who was in the Capital on Friday to take part in the Conference of State Ministers of Agriculture and Allied Sectors, told HT that traders should not be allowed to carry out speculative trading in items which can impact food security, till 2010 at least. Currently, producers and buyers are allowed forward trading in wheat, rice, pulses, sugar and oils among other items.

"Items that are distributed through the public distribution system (PDS) should be kept out of forward trading. Such sophisticated tools of commerce may not help farmers who are mostly illiterate and unaware," Swaminathan said.

Swaminathan's comment echoes the recent recommendations made by the Standing Committee on Food, Consumer Affairs and Public Distribution on the Forward Contracts (Regulation) Amendment Bill, 2006.

By definition, forward contracts are contracts entered into by producers (farmers) and buyers for physical delivery of the commodity at a later date and at a pre-determined price and quantity. This leaves room for speculation and price manipulation if there is a gap between the fixed quantity of crop predicted and the actual crop output.

"The Committee's review of commodity trading in the agricultural sector during the last three years has revealed that intended benefits of the commodity market have not been realised by the farmers' community, for whom the ban on forward trading was lifted. This trading has not produced any positive results, except introducing an additional element of instability and marginalisation…Small and marginal farmers, who constitute more than 80 per cent of the farmers' community have been further marginalised," the Committee noted.

The Committee had further noted that to permit forward contracting and trading was "nothing but a ploy for protecting speculative financial interests."

The number of commodities designated as essential commodities, which stood at 70 in 1989, was brought down to 15 during the NDA regime. This meant producers and traders could contactualise and trade in 55 more items.

In fact, the CPIM had pointed out that along with this change, two more orders passed during the NDA regime in 2002 and 2003 had pushed up prices of essential commodities. These two orders removed licensing requirements, stock limits and movement restrictions on wheat, coarse grains, sugar, edible oilseeds, pulses, jaggery, flour and vegetable oil. It allowed dealers, according to CPIM, to freely buy, stock, sell, transport, distribute and dispose these items.

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First Published: Dec 22, 2006 20:55 IST