Commodity Derivatives Market To Boost Farmers' Income: CII

After witnessing an exponential growth since its inception till FY 2011-12, the commodities Futures market has seen contraction due to various reasons such as suspension in trading of few commodities, enforcement of stock limits in certain commodities from time to time, introduction of Commodities Transaction Tax (CTT), etc.

Chandrajit Banerjee, Director General, CII, highlighting the importance of commodity markets in the economy said that “the country remains one of the largest producers in the world for most of the agricultural commodities and there is an urgent need to safeguard the interests of the various stakeholders including farmers by providing them adequate hedging facilities through development of commodity derivatives market”.

He further added that, “The move to bring the regulatory control under Securities and Exchange Board of India (SEBI) has paved the way for next level of reforms in Indian commodity markets that aim not only at deepening and widening of the market but also make it safer for every stakeholder including farmers to transact efficiently”.

SEBI has allowed options contracts and has also allowed hedge funds to invest in commodities market. The objectives behind these measures are to deepen the Indian commodity derivatives market by allowing the entry of financial institutions and to widen it by allowing options with commodity futures contracts as underlying securities, observed the CII release.

To further support the initiative of SEBI, CII has recommended various measures which it feels, if implemented, would go a long way in helping the commodities market grow and become more vibrant and allow them to further benefit the entire commodities value chain and its participants starting from the farmer.

CII has recommended that Commodity Transaction Tax (CTT) be removed on agri-processed commodities and for delivery based non-agri commodity derivatives contracts. While the agricultural commodities have been kept out of the ambit of CTT, the levy of CTT on agri-processed commodities has created an anomaly and has drastically reduced the hedgers participation in such commodities on account of increased impact cost. It is therefore recommended to abolish CTT on Agri processed commodities which may help in establishing a more stable price regime in these commodities.

CII has divided its other recommendations into 3 parts with a focus on Ease of Doing Business (EoDB), Products and Participants.

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Suhani Verma

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