NEW DELHI, May 12: To placate agriculture and consumer affairs minister Sharad Pawar, the government may prune the commodities transaction tax (CTT) and also re-introduce an ordinance amending the Forward Contract Regulation Act to strengthen the Forward Markets Commission (FMC), the commodities futures market regulator. According to government officials, the four-month suspension of futures trading in potato, soya oil, rubber and chana was done much against the wishes of the FMC. The regulator believes that futures trading has nothing to do with inflation and has not been not causing a rise in spot prices. “As per a compromise deal between the two ministries, trading in the four commodities would be suspended for four months, but the CTT would be cut and FMC given more teeth,” said an official who did not wish to be quoted. Finance Minister P Chidambaram had introduced the 0.0017 per cent CTT on futures transactions in commodities in the Budget for this fiscal. The revenue department expects to realise about Rs 800 crore from the tax. At the sidelines of an event, Pawar told reporters there was no plan to suspend more farm products from futures trading. “I don’t think any new commodities will be added,” he said, expressing hope that trading in soya oil, chana, potato and rubber — which that accounted for a turnover of Rs 1,000 crore in the NCDEX and MCX — would commence after September 6.

The suspension of futures trading in these four commodities is in addition to last year’s ban on wheat, rice, tur and urad, which the government had imposed just ahead of the previous year’s Budget. In respect of the commodities suspended last year, Pawar noted that prices of two items have stabilised post-suspension, while rates of the other two commodities have increased. He said that the government has not yet taken a final view on the recommendations of the Abhijit Sen Committee, constituted last year to look into the impact of futures trading on the price rise. “We have not taken a view on the report. Because if there are some specific recommendations, there are also separate views communicated, including that of the Chairman (of the panel),” he said.

The Committee had found no conclusive evidence on whether futures trading impacts prices of essential commodities or not. However, Planning Commission member Abhijit Sen, who headed the Panel, favoured continuation of the ban on wheat, rice, tur and urad.