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Jayanta Mallick

KOLKATA, March 3

THE Forward Markets Commission (FMC) has finally withdrawn its in-principle permission accorded to the consortium led by the Punjab Warehousing Corporation (PWC) in 1999 for setting up a National Futures Commodity Exchange. FMC has planned to seek fresh applications very shortly from corporate entities for floating the proposed exchange.

Dr Kewal Ram, member of the FMC, told Business Line from Mumbai that the formal notice would be published next week. ``PWC, which had roped in Mahindra & Mahindra and ICICI along with some others as co-promoters, could not carry through its intent in over two years. Thus, the commission, in consultation with the Union Ministry of Food and Consumer Affairs, was forced to withdraw the permission'', Dr Ram explained.

Only corporate entities will be allowed to apply for floating the proposed on-line, demutualised and multi-product commodity futures exchange. ``No individual or association will qualify as a promoter of the proposed bourse. However, FMC has decided against mentioning any net worth threshold for the applicant'', he added.

Learning from previous experience, this time around, FMC at the preliminary level of selection wants to ensure that the applicant possesses a good financial and managerial track record to implement the project within a reasonable time frame.

Last time, the concept of establishing a national futures exchange for agri-commodities cropped up during the exercise of selection for promoters for an oil & oil products exchange.

``Out of the 23 applicants for the oils/oilseeds and oil meals bourse, two were short-listed for the national commodity exchange project. This time it is not an evolving situation,'' Dr Ram pointed out.

The proposed commodity exchange may be for all agri-commodities. ``Currently, 81 agri-commodities are out of the list meant for futures trading. As the Finance Minister in his Budget speech declared the intention for extending futures and forward trading to cover all agricultural commodities, the proposed national exchange is likely to be allowed to carry out futures trades in items which at present remain banned.''

However, Dr Ram felt that the Forwards Contracts Regulation Act (1952) has to be suitably amended for the purpose. Also, numerous Government orders, issued from time to time, have to be superseded. The Essential Commodities Act (ECA), which restricts movement and storage of certain agro items, will have to amended to include such items for futures trading.

``Even though ECA does not specifically prohibit futures/forward trading, until such restrictions are removed, futures trading in those items will be viable'', he observed.

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FMC cancels permission to PWC consortium -- Fresh bids soon for futures exchange

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