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CHENNAI, Sept. 6

THE restrictions on futures trading on a range of commodities are likely to be lifted and futures trading in crude palm oil is under consideration, according to Mr Anand Kumar Bhatt, Chairman, Forward Markets Commission (FMC).

Addressing a seminar here on Friday on minimising risk and optimising return with crude palm oil futures, Mr Bhatt said the restricted list of commodities, in which futures trading is banned, was likely to be pruned or totally done away.

Currently, futures trading is banned in 81 commodities. The Government has banned them by placing them under Section 17 of the Forward Contract (Regulation) Act (FCRA). The FMC has recommended to the Government that these commodities be shifted to Section 15 of FCRA, which allows regulated trading.

"The idea behind this is that if the Government decided to allow futures trading in any one of these commodities, it can do it straightaway. The proposal is before the Government and the Cabinet has to approve it," he said.

The introduction of futures trading in crude palm oil would enable arbitrage between the Indian exchange and the Malaysian Derivatives Exchange (MDEX). The scope for cooperation between the two exchanges would also be enhanced, Mr Bhatt said.

MDEX handles about 1.25 lakh tonnes of the commodity per day, and about 35 per cent of this relates to hedging operations and the balance is speculative trading. At present about 40 - 50 per cent of foreign participation in MDEX is from India.

As the gap in the differential tariffs between soyabean oil and crude palm oil is narrowed, the crude palm oil will gain increasing significance here. The fixation of basic import price for soyabean oil would have a positive impact on crude palm oil, he said.

Mr Sundarajoo Krishna, CEO, e-commodities Ltd, one of the companies that has received in-principle approval to set up futures exchanges for sugar, said the company was looking at setting up similar initiatives in wheat, cotton and financial instruments.

The sugar industry could benefit significantly, with the annual production estimated at Rs 25,000 crore. With a production of about 18 million tonnes, India was among the largest producer, and it consumes about 16 million tonnes. e-commodities is backed by some of the largest sugar mills in the country and its exchange — Indian Derivative Exchange (INDEX) - has a world-class domain partner MDEX and technology provided by Sify.

The seminar was organised by MDEX. It was incepted in June 2001 with the merger of the Kuala Lumpur Options and Financial Futures Exchange Bhd and the Commodity and Monetary Exchange of Malaysia. It offers derivative products that cover equity, financial and commodities.

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