Lok Sabha Question No. 96 (STARRED), answered on 2015-12-04
Subject: Forward Trading
Ministry: FINANCE
Asked by: KESHAV PRASAD MAURYA, SRIRAM MALYADRI

*96:

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA STARRED QUESTION No. *96

TH

## TO BE ANSWERED ON: 04 DECEMBER 2015 FORWARD TRADING

SHRI KESHAV PRASAD MAURYA:

## SHRI MALYADRI SRIRAM:

Will the Minister of FINANCE be pleased to state:

- (a) the extent to which futurelforward trading in commodity market is responsible for inflation;
- (b) whether the Government proposes to an end to the forward trading in commodity market SO as to check inflation and black marketing; If so, the details thereof and if not; the reasons therefor along with the alternative   stepslmeasures   taken/proposed to be taken to curblcheck inflation and black marketing; put
- (c) whether there is a gap between the securities and commodity market, if so, the details thereof and the reasons therefor; and huge
- between the two markets and safeguarding the interests of the investors?

## ANSWER

## MINISTER OF FINANCE (SHRI ARUN JAITLEY)

- (a) to (d): A statement is placed on the Table of the House.

## STATEMENT REFERRED TO IN THE REPLY TO LOK SABHA STARRED QUESTION NO. *96 RAISED BY SHRI KESHAV PRASAD MAURYA AND SHRI TH MALYADRI SRIRAM MEMBERS OF PARLIAMENT DUE FOR REPLY ON 04 DECEMBER, 2015 REGARDING <FORWARD TRADING"\_

(a) & (b) Several empirical studies have examined the reasons and factors for food inflation in India. These studies indicate that movements   in agricultural   commodities are largely dependent on fundamental factors such as supply, demand, levels of exports or imports etc. and there is no evidence of causal relationship between forward/futures trading and food inflation. Futures   trading in commodities is useful to various stakeholders in the   economy for discovery and risk management: Commodity futures trading takes place under the regulatory oversight of Securities and Exchange Board of India (SEBI) and there is no proposal to an end to this trading: price price put

The Government has taken several steps to control inflation, including the following:

- 1)
- ii). Stock limits of onion extended up to Znd July 2016 under the Essential Commodities Act; 1995.
- iii). Export of all pulses is banned except kabuli channa and up to 10,0OOMTs in organic pulses and lentils.
- Zero import duty on extended till 30.9.2016 except for chana and lentils. pulses
- V)\_ Stock limits on pulses extended till 30.9.2016.
- vi): States have been advised to allow free movement of fruits and vegetables by delisting them from the Agricultural Produce Market Committee Act:
- vii). A new Plan Scheme titled Price Stabilization Fund (PSF) has been implemented for regulating volatility in agricultural commodities price
- viii). States have been advised to exempt levy of market fee on fruits and vegetables and to allow establishment of  'Kisan Mandis" where   producers and Farmer Producer Organizations can directly market their produce to wholesalers, organized retailers and

ordinary consumers

- ix). Advisory to State Governments have been issued to take strict action against hoarding black marketing and effectively enforce the Essential Commodities Act, 1955 and the Prevention of   Black-marketing and Maintenance of Supplies Essential Commodities Act; 1980.

(c) & (d) Till 28/h September; 2015, commodity futures market and securities market were regulated by the Forward Markets Commission (FMC) and the Securities and Exchange Board of India (SEBI) respectively under the provisions of separate legislations. As such, besides coming differences   in terms of products and participants. With a view; inter   alia, to  tighten the  regulatory   oversight over commodity derivatives market and bringing synergy of regulation between the commodity derivative and security markets, functions of FMC were transferred to SEBI with effect from September; 2015 and the Forward Contracts (Regulation) Act; 1952, under which FMC was operating; was repealed. Thereafter, SEBI has amended various regulations and issued guidelines to enable integration of commodity derivatives and securities trading in an orderly manner: 29th