Commodity futures which were revived in electronic mode from 2003 onwards with approvals given for new national level exchanges, have been witnessing a slow down in the past two years on account of weakness in the economy, global cues and introduction of commodity transaction tax (CTT) at the rate of 0.01% from July 2013 onwards.
The Rs 5600 cr National Spot Exchange Ltd (NSEL) payments crisis further eroded the confidence of the investor community in the regulatory process but with recent arrests of key officials including Jignesh Shah, the confidence in the system may be regained.
In this context, the commodity futures industry would like the the new NDA government to be headed by Narendra Modi to address several concerns of the commodity futures industry and commodity markets in general.
The shifting of commodity markets regulator, Forward Markets Commission (FMC) from Ministry of Food, Consumer Affairs and Public Distribution to Finance Ministry was laudable but in the absence of sufficient autonomy and independent status FMC may not be able to discharge its duties to the investor public at large. Hence, the passage of Forward Contracts Amendment Act in Parliament and bringing electronic spot exchanges under its ambit should be given prime importance by the new government.
India’s commodity exchanges have witnessed rapid fall in trade volumes in the past two years.According to Forward Markets Commission, trade volumes fell 40.49% in the year to March 2014, the second straight year of decline. In value terms trading volume fell to 101.44 trillion rupees compared to 170.46 trillion rupees a year ago.Hence there is an urgent need to restore investor confidence in commodities and revive trade volumes.