‘Ban on rice, wheat futures trading should continue’
Thursday, 24 April 2008

Despite acknowledging the fact that there is little evidence to link the price rise to futures trading, Avijit Sen panel has taken the safe route on the politically sensitive issue, and maintanied that freeze on futures trading of rice, wheat, urad and tur should continue, report agencies.

The draft recommendation of the panel shows its sensitivity to the perception among the political class that futures in food articles have been a major factor behind the current price spiral.

Though the committee is likely to submit its report next week, the recommendation to persist with the suspension of the trading of the four items, though not backed by scant evidence, is unlikely to be changed. Political parties like CPI (M) and CPI are in the forefront of the campaign demanding ban utures trading in commodities.

It was the pressure from them and others which led the government, anxious to avoid charges of sheltering those speculating in food items, to suspend the trading in wheat, rice, tur and Urad in 2007.

The unabated rise in prices disproved the link that was sought to be established between the futures and the volatile indexes. With elections nearing fast, amid indications that price rise will be one of the hot issues in series of contests begining with the one in Karnataka next month, government seems to lack the stomach for a fight on the issue.

The committee, in a draft report circulated among the members, favoured the role of speculators in the futures market as they provide liquidity to the market. He said that informed speculation only helps the market in price discovery of the commodity.

A senior economist said banning of futures trading would be a knee-jerk reaction of government and would hurt reforms in financial sector. The committee also pointed out that that even in the developed economy like US people used to balme futures trading for the price rise.

The panel has suggested to form a committee on commodity market similar to that on capital market to finalise policy issues concerning development and regulation of market. Another report adds: India admits importing wheat at higher rate than MSP The government said it imported wheat during the last two years at a higher rate than the minimum support price (MSP) paid to farmers, report agencies.

“Import of wheat was done by floating global tenders at prevailing international prices which were higher than MSP,” Agriculture Minister Sharad Pawar told Lok Sabha in a written reply. While 55.54 lakh tons of wheat was imported at a weighted average price of USD 204.66 per tonne during 2006-07, 17.69 lakh tons of wheat was imported at a weighted average price of USD 372.82 per tonne during 2007-08, he added.

Replying to a query whether there is any proposal to procure wheat at the price being paid for import, Pawar said: “Wheat is procured at MSP, while its import is done through global tenders floated by designated public sector undertakings who have requisite expertise in international trade”.

The tender was published in leading newspapers as well as on the websites of these undertakings in order to get wider participation. Further, the tender terms were streamlined to get competitive bids, he added.

In reply to a separate query, Minister of State for Agriculture, Akhilesh Prasad Singh said wheat stocks as on April 1, 2004, is more than the buffer norms of 40 lakh tonnes at the start of Rabi Marketing Season 2008-09.

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