Government has
allowed futures trading in all major commodities by removing
the prohibition on 54 commodities under the Forward Contract
(Regulation) Act, 1952. This is a part of the series of efforts
in recent years in removing liberalisation of the economy in
general and the agricultural sector in particular. The Government
had declared its intent to allow futures trading in all major
agro commodities in the 2002-03 Budget Speech of the Finance
Minister. The same objective was also charted in other policy
announcements such as the National Agricultural Policy 2000
and in the recommendations of various expert bodies. In August
2002, 27 items of oilseeds, oils and their cake were removed
from the prohibited list containing 81 items. The 54 items thus
liberalised include pulses, remaining edible oilseeds and oils,
spices and metals. Thus major voluminous commodities such as
wheat and rice, major pulses, gold and silver are now available
for futures trading and in the process the stake holders can
use the market-based tools of risk management to hedge their
exposure and in `discovering’ future prices. Opening up of foodgrains
and bullion for futures trading can be considered as major milestones.
With the opening
up of these 54 items for futures trading presently there are
94 commodities in the regulated list under Section 15 of the
Forward Contract (Regulation) Act., 1952. This implies that
futures trading can be organised in these commodities only through
recognised Commodity Exchanges subject to the rules and regulatory
procedures being prescribed by the Forward Market Commission,
the commodity futures market regulator, from time to time. All
the remaining commodities are now "free" which means
that futures trading in these items can be organised through
any recognised/registered Commodity Exchange under section 14
of the Forward Contract (Regulation) Act by obtaining a ‘Certificate
of Registration’ from the Forward Markets Commission.
Thus a new
era has been heralded by means of the current decision of the
Government by allowing futures trading in all commodities. Interested
Exchanges could conduct commodity-specific-feasibility studies,
and if found feasible, approach the Forward Markets Commission
for obtaining necessary permission either under Section 15 or
Section 14 of the FC ( R ) Act, as the case may be, for permission
to commence futures trading. For cases under Section 15, FMC’s
recommendation will be processed by the Department of Consumer
Affairs for final approval (except for exchanges with national
status for whom only approval by FMC for contract specifications,
by-laws etc. are needed).
