Mumbai: The nation’s commodity markets regulator, the Forward Markets Commission, or FMC, believes futures trading in the US market is responsible for the rising commodity prices, its chief said. The bulk of inflation is caused by commodities which are not traded on India’s commodity exchanges. Fruit and vegetables which are currently driving inflation are also not traded on exchanges here, FMC chairman B.C. Khatua told reporters on the sidelines of a conference here.
Rising food prices, apart from high oil and metals prices, have pushed up the country’s inflation to 7.41% for the week ended 29 March.
Khatua said several hedge and private equity (PE) funds were driving commodity prices higher in the US market and the US Commodity Futures Trading Commission (CFTC), despite its experience and power, could not control this.
CFTC is the regulator for the commodities and capital market derivatives in the US.
Khatua said that a few commodities such as steel were witnessing strong price levels because of speculation by some hedge and PE funds.
The Indian market is entirely a retail market, driven by small hedgers, producers, exporters, importers, processors or small speculators, he said. “We don’t have large institutional speculators who have got tonnes of money to pump into the market and corner it,” he added.
“We rejigged our open interest limits, price limits, margin limits as well as the penalty amounts. All these measures have yielded results,“ the FMC chief said.
In India, the recent hike in steel and mineral prices was responsible for the higher inflation rate, but these commodities are not traded on the electronic platform, he said.
Refuting charges of manipulation in commodity prices, Khatua said on the electronic exchanges, without seeing each other, people were matching transactions by quoting prices and so there was no scope for price manipulation. “One or two persons cannot drive the market, when there are several participants and the market is liquid.”
On the government’s intervention to curb edible oil and pulse prices, he said the move has worked.
On the steel industry’s demand to ban futures trading, he said the total turnover of steel futures was 15,000 tonnes per day and the total open interest 30,000 tonnes, while the country steel market was estimated at 50 million tonnes (mt). It is baseless to say that a 30,000-tonne open interest is driving the 50mt market, Khatua added.