Will hunger hit Forward Markets Commission’s (FMC) ambitious plans for the future? If things go like this and the message coming out of the Central government are any indication, the big plans of Futures trade is all set to gather dust for some more time.
The government’s reasons are simple. Inflation is ruling at 6.68 per cent, a 13-month high. Again the UPA government at the Centre is gearing up for the elections. A soft Budget by Union finance minister P Chidambaram was a clear indication for that.
The government does not want to spoil the good impression created with the Budget with a Rs 60,000 crore loan waiver by letting the inflation go high. Moreover, the government is already under pressure from the Left on Indo-Us nuclear deal and rising prices.
And, according to the Left and certain other groups in the UPA government, the main reason for inflation is Futures trade in commodities. Even though the Abhijit panel, appointed to study the impact of Futures trade in inflation, recommended that Futures is not to be blamed for inflation, the government and Left parties are not ready to buy that argument.
So, the Centre started the ‘ban Raj’ last year itself. It banned Futures trade in wheat, tur and several other food items in a bid to rein in the rising prices.
But, it seems, nothing has worked. Prices are still going up. And the government is back to square one, still fighting inflation. This time also the victim will be Futures trade. The government will, in all possibility, think more ways to stop Futures trade in several other commodities so that the prices come down.
Even though the finance minister says that the reason for the price rise is a supply problem, most of the UPA partners are not ready to buy that argument.
Here comes the jolt for the FMC. Worried over the price rise, the Centre is unlikely to let Futures trade thrive in India.
It may also try to clip the wings of the FMC. During the past few months the government there were efforts to give FMC autonomy and more powers like the SEBI.
But, if inflation goes up like this, all those plans may go to the backburner.
In January, the government had issued an ordinance, making FMC independent regulatory body like the Securities and Exchange Board of India (Sebi) or the Telecom Regulatory Authority of India (Trai).
However, the ordinance will lapse on April 7. The hope for the FMC was that by then the Forward Contracts (Regulation) Amendment Bill, 2008 — introduced to replace the Ordinance — will be passed by Parliament.
But, if the situation remains the same, there is a big chance of the Bill facing lot of opposition from the UPA partners itself.
The issue of forward trading in commodities is a politically sensitive one, especially at a time when inflation is at a 13-month high of 6.68 per cent.
Moreover, the government also does not want to be seen as favouring commodities trading, which has often been cited as one of the major reasons for the rising commodity prices.
While the consumer affairs ministry was keen that the Bill be discussed before Parliament went into recess, there seemed to be a lack of political support for the move after the parties cited Futures trading as one of the reasons for the spurt in farm prices in recent weeks.
According to some farmers organizations, the FMC’s autonomy will be opposed by several parties and farmers’ unions if the inflation goes beyond the anticipated levels.
The government’s reasons are simple. Inflation is ruling at 6.68 per cent, a 13-month high. Again the UPA government at the Centre is gearing up for the elections. A soft Budget by Union finance minister P Chidambaram was a clear indication for that.
The government does not want to spoil the good impression created with the Budget with a Rs 60,000 crore loan waiver by letting the inflation go high. Moreover, the government is already under pressure from the Left on Indo-Us nuclear deal and rising prices.
And, according to the Left and certain other groups in the UPA government, the main reason for inflation is Futures trade in commodities. Even though the Abhijit panel, appointed to study the impact of Futures trade in inflation, recommended that Futures is not to be blamed for inflation, the government and Left parties are not ready to buy that argument.
So, the Centre started the ‘ban Raj’ last year itself. It banned Futures trade in wheat, tur and several other food items in a bid to rein in the rising prices.
But, it seems, nothing has worked. Prices are still going up. And the government is back to square one, still fighting inflation. This time also the victim will be Futures trade. The government will, in all possibility, think more ways to stop Futures trade in several other commodities so that the prices come down.
Even though the finance minister says that the reason for the price rise is a supply problem, most of the UPA partners are not ready to buy that argument.
Here comes the jolt for the FMC. Worried over the price rise, the Centre is unlikely to let Futures trade thrive in India.
It may also try to clip the wings of the FMC. During the past few months the government there were efforts to give FMC autonomy and more powers like the SEBI.
But, if inflation goes up like this, all those plans may go to the backburner.
In January, the government had issued an ordinance, making FMC independent regulatory body like the Securities and Exchange Board of India (Sebi) or the Telecom Regulatory Authority of India (Trai).
However, the ordinance will lapse on April 7. The hope for the FMC was that by then the Forward Contracts (Regulation) Amendment Bill, 2008 — introduced to replace the Ordinance — will be passed by Parliament.
But, if the situation remains the same, there is a big chance of the Bill facing lot of opposition from the UPA partners itself.
The issue of forward trading in commodities is a politically sensitive one, especially at a time when inflation is at a 13-month high of 6.68 per cent.
Moreover, the government also does not want to be seen as favouring commodities trading, which has often been cited as one of the major reasons for the rising commodity prices.
While the consumer affairs ministry was keen that the Bill be discussed before Parliament went into recess, there seemed to be a lack of political support for the move after the parties cited Futures trading as one of the reasons for the spurt in farm prices in recent weeks.
According to some farmers organizations, the FMC’s autonomy will be opposed by several parties and farmers’ unions if the inflation goes beyond the anticipated levels.
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