'RBI should allow commodities trading in futures mkt'
The task force on plantation sector chaired by N Rangachari recommended RBI should allow trading in the futures market.
By Priyanka Kumari, INDIATIMES NEWS NETWORK |
NEW DELHI: The task force on plantation sector chaired by N Rangachari recommended RBI should allow trading of comodities in the futures market. The move is intended to increase the money flow in the plantation sector. The task force, which submitted its report to the minister of state for commerce Jairam Ramesh suggests a system of IOUs by way of which an appointed central body will participate in the market on behalf of the growers. The IOUs will be issued as units to the growers. The report called for a change in RBI guidelines that prevents deposit taking institutions to participate in the futures market at present.
Jairam Ramesh, says, ���The task force also proposes that small farmers should be allowed to utilise the derivative contracts and options through cooperative societies,��� However, for this an appropriate infrastructure needs to be set up, where an agency competent to deal in derivatives undertakes the trading on behalf of the cooperative institutions, he explains.
It is also put forward that a parallel programme for insurance should be created by way of which insurance will be provided to the farmer through the existing Price Stabilisation Fund Trust (PSFT) as well as through the IOU system. ���Insurance through PSFT will be phased out at the end of the eleventh plan after which the IOU system will come into place,��� Mr Rangachari said while submitting the report to the commerce ministry.
An IOU is a legally binding agreement between a borrower and a lender. The terms of the loan are set out in a contract, and, once it is signed, the two parties must abide by the terms of the contract or face legal repercussions.
The task force also suggests that PSFT will extend weather insurance to the cultivators based on the quantum of rainfall in a year so as to iron out differences emerging to global price fluctuations.
Taking the case further, the ministry of commerce has submitted a note to the cabinet committee on economic affairs (CCEA) suggesting an increase in the insurance to farmer from Rs 1,000 in a year to Rs 5,000 out of the Rs 500 crore PSFT. The government also proposes to raise the personal accident insurance from the current Rs 25,000 to Rs one lakh. Under the new changes recommended to the CCEA, the government has also asked the inclusion of the permanent work force engaged on plantations under the insurance scheme and not just growers.
Jairam Ramesh, says, ���The task force also proposes that small farmers should be allowed to utilise the derivative contracts and options through cooperative societies,��� However, for this an appropriate infrastructure needs to be set up, where an agency competent to deal in derivatives undertakes the trading on behalf of the cooperative institutions, he explains.
It is also put forward that a parallel programme for insurance should be created by way of which insurance will be provided to the farmer through the existing Price Stabilisation Fund Trust (PSFT) as well as through the IOU system. ���Insurance through PSFT will be phased out at the end of the eleventh plan after which the IOU system will come into place,��� Mr Rangachari said while submitting the report to the commerce ministry.
An IOU is a legally binding agreement between a borrower and a lender. The terms of the loan are set out in a contract, and, once it is signed, the two parties must abide by the terms of the contract or face legal repercussions.
The task force also suggests that PSFT will extend weather insurance to the cultivators based on the quantum of rainfall in a year so as to iron out differences emerging to global price fluctuations.
Taking the case further, the ministry of commerce has submitted a note to the cabinet committee on economic affairs (CCEA) suggesting an increase in the insurance to farmer from Rs 1,000 in a year to Rs 5,000 out of the Rs 500 crore PSFT. The government also proposes to raise the personal accident insurance from the current Rs 25,000 to Rs one lakh. Under the new changes recommended to the CCEA, the government has also asked the inclusion of the permanent work force engaged on plantations under the insurance scheme and not just growers.
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