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Informist, Tuesday, Mar. 24, 2026

 

By Pallavi Singhal and Sagar Sen

 

NEW DELHI – The government is divided on allowing futures trading in agricultural commodities again, as concerns outweigh the benefits. The opinion that futures trading serves as an important "price signal" and provides a mechanism for "risk hedging" has been discussed, strengthening the case for reopening such markets, said a senior government official in the food and consumer affairs ministry. However, it has also been noted that in practice, proponents of futures trading have not been able to demonstrate tangible benefits in stabilising prices, the official said.

 

"The exchanges have cited studies showing that banning futures trading has not affected price stability or volatility," the official said, adding that concerns remain that such markets can become disconnected from physical supply. "It is like trading without any quantity."

 

According to an official in the agriculture ministry, while current market conditions remain conducive for futures trading to be launched, "it is unlikely to happen". Prices of agricultural commodities have remained largely "comfortable" over the past year, limiting pressure on both the food and consumer affairs ministries, but policy inertia is on the side of extending the ban. "It has been closed for so many years. The inertia may be to maintain status," the official added. "Maintaining the status quo may be the default outcome unless there is a strong policy push working in favour of revoking the ban," the official said.

 

Echoing the cautious stance, a senior official with the Department of Economic Affairs said earlier considerations to allow futures trading have been complicated by recent geopolitical developments. "There was a thinking of allowing these trades to happen, but with recent developments on the geopolitical front it seems a bit difficult," the official said.

 

The official also flagged concerns over the potential lack of market participation even if trading is permitted. "There is also a concern that even allowing this, there may not be big volumes of trade due to the global uncertainties."

 

A final decision in the matter is expected within the week, before the ban expires on Mar. 31.

 

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 three more times till Mar. 31 this year. Last year, the decision was announced on Mar. 24.

 

Studies released by the Birla Institute of Management Technology and Indian Institute of Technology, Bombay, in November last year, which were funded by the National Commodity and Derivatives Exchange, 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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