To curb “excessive speculation” on farm commodities in the futures markets leading to hoarding and price hike, the Centre may consider a ban on certain commodities from futures trading. The Forward Market Commission will watch trading patterns, volatility and individual trader positions in commodities such as guar gum, guar seed, pepper, potato, cardamom, mentha oil, soya-oil, soybean, chana, mustard and rubber.
Minister of State for Consumer Affairs K.V. Thomas said the Consumer Affairs secretary had been asked to conduct an enquiry into the recent fluctuations in the commodity futures market for guar gum and guar seed and submit a report in 10 days after which the government would take action.
“The futures market is not to be used for hoarding. Illegal management of finance should not be there. We have got some reports that we have to verify. Certain quantities of a commodity were exported. Whether that much had been produced or not is to be verified,” he said.
Advisory committees
The Minister announced the setting up of advisory committees for all commodities including agri-products, comprising physical market participants including farmers' representatives, producers, processors, exporters, domain experts and other stakeholders.
The panels would advise the government and the Forward Markets Commission (FMC) on how to bring about a better alignment between physical markets and futures markets so that the farmers and hedgers benefitted from futures trading.
An advisory committee has already been announced on futures trading in rubber.
Following a meeting between FMC chairman Ramesh Abhishek and Mr. Thomas on Friday, the government advised the FMC to keep a close watch on the situation and use all regulatory tools to keep a check on excessive speculation in futures trading. The Finance Ministry is also monitoring the situation.
Many complaints
“I have received several complaints about excessive speculation and fluctuations in futures trading in farm commodities leading to escalation in prices particularly in guar gum and guar seed,” Mr. Thomas told journalists.
He said the FMC was also asked to ascertain whether there had been any attempts to hoard commodities to influence the futures markets and if so, how this activity was being financed.
Between January and March 2012, for instance, mustard seed prices rose by 101 per cent, chana 108 per cent, potato 170 per cent, mentha oil 172 per cent, soybean 118 per cent, cardamom 185 per cent and black pepper 122 per cent on the exchanges. Mustard seed, chana, potato and soybean are important contributors to the monthly food inflation index.
The FMC last month banned traders from taking fresh positions in the futures contracts of guar seed and guar gum on the NCDEX platform after speculative activities resulted in prices shooting up 500 per cent and 1,000 per cent, respectively, in the past year. Already there is a ban on futures trading in rice, urad and tur. The size of the commodity futures market is estimated to be over Rs. 77 lakh crore.
