Futures trading has nothing to do with the increase in the prices of food products such as wheat and rice.
That’s the unanimous finding of the four-member committee headed by Abhijit Sen that was set up by the government to look into the connection between the two. However, the members of the committee differed on other issues.
The jury’s out: Abhijit Sen, member, Planning Commission. Photographer: Madhu Kapparath / Mint
Besides examining the extent of the impact of futures trading, the terms of reference for the Sen committee were “to suggest ways to minimize the impact” and make recommendations for “an increased association of farmers in the futures market/trading so that farmers are able to get the benefit of price discovery through commodity exchanges.”
“No causal relationship has been established between futures trading and prevailing prices of essential commodities,” said Sen, member of the Planning Commission and chairman of the committee. He, however, refused to divulge details of the report which are spread over 60-70 pages and will be submitted on 27 April.
Sen also said there were certain difference of opinion between members of the committee and said the concerns of individual members would be separately mentioned in the final report.
Members of the committee include, apart from Sen, Sharad Joshi, member of Parliament; Prakash Apte, professor at the Indian Institute of Management (IIM), Bangalore; and Siddharth Singh, professor, IIM, Ahmedabad.
The futures market is regulated through the Forward Markets Commission, which is part of the ministry of consumer affairs. The Multi Commodity Exchange of India, National Commodity and Derivatives Exchange, National Multi-Commodity Exchange of India and the National Board of Trade are the four major trading exchanges in the country with an average daily turnover of agriculture commodities estimated at Rs2,500-3,500 crore involving around 650,000 traders, arbitrators, and risk and hedge managers.
However, farmers as well as farm cooperatives are not part of futures trading.
Confirming Sen’s observations, Joshi said the committee had found no evidence that futures trading affects spot prices of food.
“The findings will contain something which I will call ‘common minimum report’ as the main content. Besides, individual members’ opinion will be addressed separately, including that of the chairman,” said Joshi who is also founder of Shetkari Sanghatana, a farmers’ organization in Maharashtra. He added that these concerns include rising prices in India and elsewhere, the ban on export of certain products, and restrictions on import of some products.
It wasn’t immediately clear whether the differences between the members of the committee were in these areas or others.
The government banned futures trading in wheat, rice, tur and urad pulses last year as it was largely being perceived to be leading to a rise in prices.
However, the Left Front, which has been demanding a blanket ban on futures trading in essential commodities, has opposed the findings of the Sen panel.
Brinda Karat, Politburo member of the Communist Party of India (Marxist), said: “We totally disagree that there is no correlation between futures trading in essential commodities and rise in prices. The government cannot completely rely on this committee’s report since there is no agreement within the committee. Thus, the government must implement a ban on futures trading in essential commodities.”
Abani Roy, secretary, Revolutionary Socialist Party, said: “We have already said that futures trading should be stopped because it does have some adverse effect on prices. However, it seems a majority in the Abhijit Sen committee is not of this opinion. ”
Ruhi Tewari contributed to the story.