The Forward Markets Commission (FMC), chief regulator of forwards and futures commodity markets in India, will, henceforth, be overseen by the Ministry of Finance instead of the Department of Consumer Affairs under the Ministry of Food.

This decision was taken at the highest level, and notified in the wake of alleged scam in National Spot Exchange Limited (NSEL).

The decision has since got the approval of President Pranab Mukherjee.

The FMC is a statutory body set up under the Forward Contracts (Regulation) Act, 1952. Till March 2009, it had regulated Rs. 52 trillion worth of commodity trade. The FMC is said to have alerted the government last year on violation of rules by the NSEL; but there was no action.

Under the rules, the NSEL must complete trades within 11 days, but it was allowing contracts for 25-34 days. This has triggered speculation in trade, resulting in abnormal returns to traders. Furthermore, it is alleged that warehouse receipts of commodity stocks were being issued without warehouses having stocks. The NSEL is supposed to pay back over Rs. 5,600 crore of investors’ money, and has already defaulted twice. Experts bemoan the lack of a particular regulatory body for spot commodity trading .

Earlier, spot exchanges were under Union Agriculture Minister Sharad Pawar who handled the Department of Consumer Affairs.