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M.R. Subramani

CHENNAI, Sept. 11

THE Government is "thinking aloud" on closing futures exchanges that are either witnessing zero volume turnover or not functioning.

"There is a loud thinking on why futures exchanges that are not functioning should not be closed down. We are also having a close look at exchanges where the turnover is poor. But we have no immediate plans to shut them down," official sources told Business Line.

The Forward Markets Commission Chairman, Mr Anand Kumar Bhatt, when contacted, said the Government was concerned over some of the futures exchanges existing "merely on the books". FMC has already withdrawn the permission given to Keshav Futures Exchange in Delhi for trading in potato.

"We asked them to close as they were not functioning. They had raised the capital and the bylaws were ready but they failed to take off," Mr Bhatt, who was on an official visit in connection with a derivatives conference in Chennai last week, said.

The official sources and Mr Bhatt were responding to queries on the statement made by the Food and Consumer Affairs Minister, Mr Sharad Yadav, that exchanges unable to function should be allowed to close down.

Mr Yadav had said most futures exchanges, with permission to hold trading in various commodities, had not been functioning as expected. The Bombay Commodity Exchange (BCE), the turmeric futures, the coffee futures and cotton futures are some of them which have failed to meet the Centre's expectations.

The Government revived futures trading in 1997-98 following a report by the Kamal Nayan Chabbra Committee. Since then, futures trading has been permitted in over 30 commodities, including a number of oilseeds with a main aim of ensuring better prices for growers.

Mr Bhatt said the Government was also concerned over the poor volume turnover in some of the exchanges. "BCE and the East India Cotton Association (that conducts cotton futures) are, for example, witnessing poor volume turnover. It is a cause for concern," he said.

However, exchanges such as BCE had good infrastructure and the Government was keen that it be put to good use. "The turnover at the Ahmedabad Commodity Exchange (ACE), which conducts castor futures, is far more than the turnover of all futures in BCE. While ACE has minimum infrastructure, BCE has modern infrastructure for trading," he pointed out.

"Perhaps two to three years from now, we will have to take stock of the situation. Because having an exchange merely on the books will only show the Government in poor light," official sources said.

Meanwhile, FMC has permitted mustard futures in Hapur, Gwalior and Kanpur. It has also given permission for cotton futures at Surendranagar in Gujarat.

FMC has given permission for these futures to stop illegal trading, according to trade sources.

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