US help to make India global hub for commodities trade

Monday, 19 July 2004, 07:00 Hrs
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NEW DELHI: The US is helping India develop a futures trading system for commodities that will suit its complex market set-up and keep the interest of farmers in the forefront, a top official said Saturday.

"The approach would be to keep the fine balance between regulation and flexibility for rational growth," L. Mansingh, secretary, department of food and consumer affairs, told a seminar.

"The system should be capable of handling the complex nature of India's commodity trade," he told the seminar co-hosted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and the National Commodity and Derivatives Exchange.

Mansingh said New Delhi has accordingly commissioned a study funded by the United States Agency for International Development (USAID) to recommend a system that could make India a global hub for commodities trading.

He said the government would also seek to strengthen the commodities market regulator Forward Markets Commission till its integration with the Securities and Exchange Board of India (SEBI) through legislation.

The government would also seek to harmonise the functioning of three national level exchanges that can trade in 120-odd commodities and several regional ones that handle single or limited merchandise, he said.

The consumer affairs secretary pointed out that that even though India is the largest producer of several commodities, it is not the leading market player in any of them.

He cited the case of castor oil in which India accounts for 70 percent of global production but traders in Rotterdam, Holland, control the global market.

P.M. Sinha, the chamber's chairman of agricultural and rural development committee, said India should ensure fairness and transparency in its trading system.

"The several layers of middlemen like moneylenders, wholesale market mafia and traders are now preventing fair returns to the farmers," he said.

P.H. Ravikumar, managing director, NCDEX, said the trade value of commodities in the country would overtake the value of stock trade in a couple of years if the reforms being contemplated were implemented.

"Once farmers' credibility is established in forward trading it would be a matter of time before the business value touches 100 billion ($2.17 billion) daily," he said.

"The NCDEX now does futures trading in 14 commodities out of which 12 are agricultural, which aggregate 60 percent of the trade value," Ravikumar said.

They include soyabean, soya oil, mustard seed and oil, rubber, jute, chickpea and pepper.

He said the daily trade value in NCDEX, which commenced operations in December 2003, has reached 6.25 billion.

Source: IANS
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