NEW DELHI, August 7 : In what may give a big boost to sentiment in the commodities market, the Cabinet will consider a proposal for re-issuing the forward contracts regulation amendment (FCRA) ordinance. Agriculture Minister Sharad Pawar did not introduce the Bill in the Budget session on concerns that future prices of commodities were fanning inflation. The ordinance lapsed subsequently.
The amendments to the FCRA will strengthen the Forward Markets Commission by providing for a regulator for the commodities market, and introduce option contracts on specific commodities by exchanges. “Options can be introduced in three-six months after the Bill is passed,” said a senior executive in a commodity exchange. In the last month or so, the daily turnover in the country’s top two exchanges — National Commodity and Derivatives Exchange (NCDEX), promoted by financial institutions and Multi-Commodity Exchange (MCX), promoted by Jignesh Shah-owned Financial Technologies — has jumped significantly to Rs 4,000 crore and Rs 25,000 crore, respectively.
Several new players are waiting in the wings to operationalise or strengthen existing commodity exchanges. For instance, Reliance Capital has recently picked up 26 per cent in National Multi-Commodity Exchange (NMCE), another national exchange specialising in pepper, cardamom and rubber. Kotak Mahindra Bank too has acquired a controlling stake in Ahmedabad Commodity Exchange with plans to make it an online screen-based trading platform. The FMC has also approved the setting up of a new national exchange by India Bulls and MMTC. Malvinder Singh-promoted Religare too is scouting for partners or looking at acquisitions.
Strengthening the commission will help curb illegal dabba trading where trades are unofficial and people do not have to maintain any margins for trading in commodity futures and also do not have to pay any transaction fees and taxes.
