Let ban on trading in key commodities remain: Sen panel

New Delhi, April 20 Despite its inability to conclude emphatically whether futures trading fuelled a rise in prices, the much-awaited draft report of the Abhijit Sen committee has suggested that trading in sensitive agricultural commodities — rice, wheat, urad and tur — remain suspended in the near future.

In its 55-page report (excluding annexures), the committee appears to have sought refuge in the international spike in food prices to suggest that the futures market in India will likely catch the global inflationary trends. Further, it has called for strengthening of the Forward Markets Commission (FMC), the regulator of the commodities futures market, recommended measures to increase farmer participation and emphasised the need to set up a Committee on Commodities Market akin to the high level committee on capital markets.

The report that has been circulated to its members for comments will be presented to Agriculture Minister Sharad Pawar who also heads the department of consumer affairs that oversees the FMC and the commodities futures market.

The committee studied the prices and volatility in 24 commodities including rice, chana, urad, wheat, tur, cotton and sugar that have a weight of 11.73 in the wholesale price index (WPI) basket. These 24 commodities accounted for 98.7 per cent of the total value of futures trading of agri commodities in 2006-07. Three (guar seed, guar gum and mentha oil) of these 24, which had a 30 per cent share in futures market, however, are not part of the WPI basket.

The analysis reveals that the WPI trend growth rate did accelerate in post-futures period in 14 of the 21 commodities. “But it was more of a rebound action as in 10 of these, there was a deceleration in the pre-futures period. It can be an outcome of a better price discovery too,” the report noted. In fact, the picture on volatility was fuzzy with the daily NCDEX data indicating a decline. “This makes the conclusion still more ambivalent,” it said, adding it could not be concluded emphatically whether futures trading fuelled volatility or price rise in agri commodities.

When contacted, Rajya Sabha member Sharad Joshi, who is also a member of the Sen committee, said, “Global high prices have become an excuse for crashing the futures market.” Joshi, who leads farmer organisation Shetkari Sanghatan and has maintained that farmers get better prices in the derivatives market, is already contemplating a dissent note to the report. The other members of the committee are...

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Let ban on trading in key commodities remain: Sen panel

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