Special Correspondent

NEW DELHI: Bowing to intense political pressure, the Centre has banned further trading in wheat and rice in the futures market with immediate effect. Trading that has already been done would, however, allowed to be squared up. Speculation in the prices of essential commodities is said to be a reason for high domestic prices.

Making this announcement in his budget proposals in Parliament, Union Finance Minister P. Chidambaram said a Committee was being set up under Member (Agriculture) in the Planning Commission Abhijit Sen.

The panel would look into the impact, if any, of forward trading on retail and wholesale prices of agriculture commodities. It would submit its report in two months. The report would suggest remedial measures, if necessary.

It is understood that the last-minute addition to the budget speech of Mr. Chidambaram was made following the Prime Minister Manmohan Singh's informal meetings with some of the Cabinet colleagues on Tuesday. Among others, the Rashtriya Janata Dal had urged the Government to take concrete action to contain inflation.

Most parties see trading in agricultural commodities as the main cause for high prices of essential commodities. The Left Parties and the Janata Dal (United) had also sought a ban on futures trading of farm commodities.

As compared to 59 in January 2005, 94 commodities were traded in the commodities futures market till December 2006, generating a volume of trade equivalent to Rs. 27.39 lakh crore.

On Tuesday, the Economic Survey, 2006-07, tabled in Parliament, noted that the futures market helps in efficient price discovery of the respective commodities and does not impair the long-term equilibrium price of commodities.