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Jayanta Mallick

KOLKATA, Jan.3

THE recent endeavour of the Forward Markets Commission (FMC) to modernise, professionalise and broadbase the management of the futures commodity markets has received a serious jolt as the proposal for a floating multi-product national commodities exchange has eventually been placed in a cold storage.

Dr Kewal Ram, member of the FMC, told Business Line that the proposed de-mutualised multi-commoditity futures market was to be a model exchange, to be emulated by the existing ones. However, the consortium of promoters— National Stock Exchange, ICICI, Mahindra & Mahindra and Punjab Warehousing Corporation— appears to have developed cold feet over.

``Though officially death of the project has not been spelt out, promoters' disagreement on the location of the exchange has served a virtual withdrawal. It is a setback for the commodities market reforms,'' Dr Ram said.

For the more than a year, FMC has been encouraging the proposed launch of a national futures exchange in order to promote a healthy and efficient futures market in commodities. This was in the backdrop of strong resistance from the existing bourses to reforms process.

The Centre has taken several moves to liberalise the futures and forward trading since the mid-nineties in view of injecting competitiveness, fool-proof trading systems and trust in the markets before global trading barriers go off in 2005. A World Bank aided programme for introducing internally accepted practices was introduced during 2000-2001 to help existing commodity exchanges.

However, the responses to the efforts of both the Government and FMC were lukewarm. ``The dominant argument was that cost of installing modern systems and practices were prohibitive. But the proposals for utilising stock exchanges' technological platforms and expertise in carrying out on-line trading practices were not tried seriously,'' Dr Ram pointed out.

It may be mentioned that the National Stock Exchange and the Interconnected Stock Exchange of India were willing to let their platforms out to commodity exchanges at a minimal cost.

The market regulator is currently keenly watching the process of formation of country's first de-mutualised futures bourse at Ahmedabad, tentatively called Commodities Exchange of India. FMC has given in-principle nod to open futures contracts for 21 items, mainly oilseed and oils.

Also, the success of the three proposed business-to-business portals, permitted to float contracts for sugar, and the on-line trading of the Bombay Oil & Oilseed Exchange would set trend for the future, Dr Ram felt.

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