Sen committee report to skip commodity futures ban issue
The Abhijit Sen Committee may end up skirting the politically-touchy issue of a ban on commodity futures after all.
By TNN |
NEW DELHI: The Abhijit Sen Committee may end up skirting the politically-touchy issue of a ban on commodity futures after all. Instead, it will submit a common report to the government, sticking strictly to the terms of reference of the panel. This is important in the backdrop of the ongoing debate over whether the ban on futures trade of some key agri commodities had an impact on the price line.
The committee had three key terms of reference: to examine whether there was an unusual hike in essential commodity prices in 2006, to examine whether futures trading in commodities contributed to the price rise and to suggest measures by which the participation of farmers in futures trading could be made easier in order for him to discover optimum price for his produce. Implicitly, the last term suggests the government supports a forward market for commodities as a key method of price discovery for farmers.
Indications are that Prof Sen will submit the common report ��� with separate comments on the issue of a commodity futures ban from different members attached ��� by April 27. The reluctance on the part of the panel to spell out whether a futures trading ban is imperative may give the government more time on the sensitive issue and it is expected the marginal cooling of inflation to 7.14% from the earlier three-year high, the forecast of a good monsoon and third advance crop estimates that pegged essential grain output at record highs could add to the leeway. Another comfort factor could be the government���s confidence that it will exceed its wheat procurement target of 150 lakh tonnes this year.
Sections of the committee have suggested that futures trading in essential commodities may have affected their spot prices. However, this has been posited as one of the many factors, including high global spurt in the price of essentials, that affected spot prices.
Indicating the data available with the panel was not enough to conclude that a ban on futures trading was imperative, Prof Sen told ET earlier this week, ���It is difficult to take a firm stand on the issue (whether a ban should be imposed) on the basis of merely four years of data available on futures trading. Like any other market, the Indian market is tracking the international futures market trend. As prices had gone up sharply at the global level, prices of even the commodities where trading was banned later went up in the domestic market.���
However, he emphasised, ���Whatever be the reason, whether suspected hoarding, supply constraints or futures trading, the bottomline is that high inflation for food is hurting the common man.���
Differences in the panel cropped up over the crucial issue of whether a futures ban was necessary to check spiral in the prices of food essentials, with only Prof Sen suggesting the existing ban on trade in rice, wheat, urad and toor should continue.
���We don���t have to say whether the ban should be lifted or not. The common report will stick strictly to the terms of reference but separate comments by different members could tackle the ban issue. The terms of reference do not include any obligation to make recommendations on the futures market. Thus, we don���t have to say anything about whether it should continue or not,��� Sharad Joshi told ET.
Apart from Mr Sen and Shetkari Sangathana leader Sharad Joshi, the panel includes IIM-Ahmedabad professor Siddharth Sinha, Forward Markets Commission member Kewal Ram and IIM-Bangalore professor Prakash Apte.
The committee had three key terms of reference: to examine whether there was an unusual hike in essential commodity prices in 2006, to examine whether futures trading in commodities contributed to the price rise and to suggest measures by which the participation of farmers in futures trading could be made easier in order for him to discover optimum price for his produce. Implicitly, the last term suggests the government supports a forward market for commodities as a key method of price discovery for farmers.
Indications are that Prof Sen will submit the common report ��� with separate comments on the issue of a commodity futures ban from different members attached ��� by April 27. The reluctance on the part of the panel to spell out whether a futures trading ban is imperative may give the government more time on the sensitive issue and it is expected the marginal cooling of inflation to 7.14% from the earlier three-year high, the forecast of a good monsoon and third advance crop estimates that pegged essential grain output at record highs could add to the leeway. Another comfort factor could be the government���s confidence that it will exceed its wheat procurement target of 150 lakh tonnes this year.
Sections of the committee have suggested that futures trading in essential commodities may have affected their spot prices. However, this has been posited as one of the many factors, including high global spurt in the price of essentials, that affected spot prices.
Indicating the data available with the panel was not enough to conclude that a ban on futures trading was imperative, Prof Sen told ET earlier this week, ���It is difficult to take a firm stand on the issue (whether a ban should be imposed) on the basis of merely four years of data available on futures trading. Like any other market, the Indian market is tracking the international futures market trend. As prices had gone up sharply at the global level, prices of even the commodities where trading was banned later went up in the domestic market.���
However, he emphasised, ���Whatever be the reason, whether suspected hoarding, supply constraints or futures trading, the bottomline is that high inflation for food is hurting the common man.���
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Differences in the panel cropped up over the crucial issue of whether a futures ban was necessary to check spiral in the prices of food essentials, with only Prof Sen suggesting the existing ban on trade in rice, wheat, urad and toor should continue.
���We don���t have to say whether the ban should be lifted or not. The common report will stick strictly to the terms of reference but separate comments by different members could tackle the ban issue. The terms of reference do not include any obligation to make recommendations on the futures market. Thus, we don���t have to say anything about whether it should continue or not,��� Sharad Joshi told ET.
Apart from Mr Sen and Shetkari Sangathana leader Sharad Joshi, the panel includes IIM-Ahmedabad professor Siddharth Sinha, Forward Markets Commission member Kewal Ram and IIM-Bangalore professor Prakash Apte.
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