Sen retracts, drops call for banning futures

Sen, however, in his individual capacity, has said in a separate supplementary note that the suspension of futures trading in the four key essential commodities must continue to avoid disruptive “go-stop” responses that neither serve the public purpose nor the growth of the markets.

The final report, which is the consensus view of the committee’s five members including Sen himself, has held there was no clear evidence of futures trading leading to a rise in prices in the spot market. It has, hence, not made any observation whether the suspension must continue or not. It has only suggested measures to better market conditions and improve farmer participation.

“The fact that agricultural price Inflation accelerated during the post-futures period does not necessarily mean it was caused by futures trading,” the report noted. “A part of the acceleration may be due to rebound of the past trend,” it added. Moreover, it noted that the period during which futures trading were in operation was too short to take a decisive call.

Acknowledging that the existing regulatory framework was weak, the committee called for giving more powers to the regulator, Forward Market Commission, by amending the Forward Contract Regulation Act. “Exchanges should act as self-regulatory organizations. Attracting speculators, arbitrageurs and other investors is no doubt important, but that should not be the primary criterion while designing contract,” the committee has said.

It also said that reforming spot markets must be the top priority for the government. The physical spot markets today have large number of infirmities. “To promote integrated national markets, the Central Government must take active steps to bring inter-state spot trade under the regulation of a central authority rather than leave it to the highly scattered Agricultural Produce Marketing Committees,” it said.

The committee also recommended ‘options’ — hedge instruments suitable...