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Informist, Saturday, Mar. 22, 2025

 

--Source: Govt to extend ban on futures in 7 agri commodities by 1 more year

-CONTEXT: Govt had banned futures trade in 7 agri commodities till Mar 31

 

By Pallavi Singhal

 

NEW DELHI – The government will extend the ban on futures trading in seven agricultural commodities by another year, till Mar. 31, a senior government official told Informist on condition of anonymity. "The decision has already been taken in the inter-ministerial committee and only the orders are awaited," the official said.

 

In 2021, the government imposed a ban on derivatives trading in seven commodities--non-basmati paddy, wheat, chana, mustard seed and its derivatives, soybean and its derivatives, crude palm oil, and moong--for a year to check rising prices. The ban was extended consecutively each year till December 2024, and extended two more times till Mar. 31 this year.

 

The decision to extend the ban by another year comes despite the National Commodity & Derivatives Exchange pushing hard for resumption of trade. NCDEX officials had met government officials several times and even sent representations to the Securities and Exchange Board of India to revoke the suspension in futures trade. Exchange officials seemed optimistic about the government allowing futures trade in oilseeds and its derivatives, saying that India mostly imports to meet its cooking oil requirements.

 

"Even though there had been discussions about opening futures trade for some commodities such as pulses, oilseeds, a final decision was based on the fact that the Indian market is not as mature yet. We have seen a turbulent year when it comes to agri-commodities. At a time when inflation has finally eased, the government did not want to set anything in motion that disturbs it," the official explained. "Moreover, such trading will only give rise to both internal and external speculation. The role foreign traders can play in disrupting the market cannot be undermined," the official added.

 

In October last year, the government had allowed trading in yellow pea futures contracts on NCDEX. In November 2023 it had allowed NCDEX to launch futures of crude sunflower oil. This had lifted hopes of the government lifting the ban on similar commodities. 

 

Studies released by the Birla Institute of Management Technology and Indian Institute of Technology, Bombay in November last year, which were funded by the NCDEX, had concluded that futures trading would help discover prices domestically, reducing the reliance on international price signals. The study had highlighted the need for careful analysis of international price movements and trade patterns, as the ban on these commodities has hurt farmers, farmer-producing organisations, and other value chain participants.  End

 

Edited by Ashish Shirke

 

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