A Bill to develop the commodities futures market could be passed in the forthcoming Budget session of Parliament, Food and Consumer Affairs Minister K.V. Thomas said on Friday.
“I believe the Forward Contract Regulation Act (FCRA) Bill will be passed in the coming session of Parliament,” the Minister said while addressing an Assocham event on the commodity futures market.
“There are apprehensions about futures trade that it is leading to price rise in commodities. But a number of studies have indicated there is no evidence to prove it,” he added.
The FCRA Amendment Bill, 2010 aims at developing the commodities futures market by arming the regulator Forward Markets Commission (FMC) with financial autonomy and facilitating the entry of institutional investors, among others.
On reports that government was mulling imposing commodity transaction tax (CTT), the Minister said: “When the issue of CTT came before us in October last year, we immediately discussed it with stakeholders and an independent view has been passed on to the Finance Ministry.”
“This is a goose (commodity market) that lays the golden eggs. When the issue (CTT) comes, we should not take a partisan view,” he said.
Mr. Thomas had recently written a letter to the Finance Minister saying that any move to impose CTT would affect the nascent market, sources said.
Speaking on the occasion, Financial Technologies Director (Research and Strategy) Madhoo Pavaskar said, “The market is gripped with fear of CTT.”
Financial Technologies is the promoter of leading commodity bourse, MCX.
“Introduction of CTT would divert hedgers and speculators to rampant dabba trading. The tax would also impact the volume and liquidity of commodity exchanges,” Mr. Pavaskar said.
While the stock markets are to channelise investments for capital formation, commodity markets are price discovery and risk management platforms, he said, adding that the commodity, before it comes for trading on the exchange platforms, is already taxed heavily.
The CTT of 0.017 per cent on commodity derivatives was levied in the 2008-09 Budget, but was not operationalised and was kept in abeyance.
The Ministry of Consumer Affairs regulates the commodities market through the FMC.
Currently, there are 21 commodity bourses with a combined turnover of Rs 136.51 lakh crore as on January 15 of the current financial year.
