Bill to give more teeth to commodity regulator FMC cleared

Bill to give more teeth to commodity regulator FMC cleared 

In a second attempt to grant an autonomous status to the commodity futures regulator FMC and provide depth to the Rs 77 lakh crore market, the govt cleared a bill to amend the existing law.

The Union Cabinet on Thursday approved the proposed amendments to the Forward Contract (Regulation) Act, 1952 which will enhance the status of Forward Markets Commission (FMC) at par with the equity market regulator SEBI.

The amendment bill is likely to be introduced in Parliament in the forthcoming winter session, sources said.

The measure is also aimed at corporatising and demutualising the existing commodity exchanges and setting up a separate clearing corporation for the transaction in these bourses.

The annual futures trading volumes of 23 commodity exchanges is estimated to be over Rs 77 lakh crore.

New market products like 'options' will be allowed "benefiting the stakeholders, including farmers, to take benefit of price discovery and price risk management," the official spokesperson said.

In the 'Options' market, a deal is struck for a commodity with a fixed present price for future delivery.

At present, the commodity market offers only the 'futures'. Under the 'futures', the deal is struck today but the commodity would be delivered at a price prevailing in future.

The UPA-I government, which was dependent on the Left support, could get the amendment bill passed in the 14th Lok Sabha as the commodity futures market came under attack for food inflation.

Commodities like sugar, rice, urad and tur are still banned on the futures market despite an expert committee, headed by Abhijit Sen, finding no nexus between the futures and price rise.

Even the Reserve Bank of India recently endorsed the Abhijit Sen's panel report.

The proposed change in the law will give more powers to FMC and would make provision for designating the Securities Appellate Tribunal (SAT) as the Appellate Tribunal.

Other provisions include exempting FMC from payment of tax on income, conferring powers on the central government and issue of directions of FMC on matters of policy and power to supersede the regulator.

FMC welcomes amendments to the Forward Contracts Act

Commodities market regulator Forward Markets Commission (FMC) has welcomed the Union Cabinet's approval of amendments to the Forward Contracts Act in Parliament.

The Union Cabinet on Thursday approved amendments to the Forward Contracts (Regulation) Act 1952 by introducing the Forward Contracts (Regulation) Amendment Bill, 2010, in the Parliament, Ministry of Consumer Affairs, Food & Public Distribution said in a release on Thursday.

After the Bill is passed and enacted by Parliament, the Forward Markets Commission (FMC) as a regulator will get the autonomy and power to regulate the market effectively.

New Products like 'options' will be allowed in the commodity market.

This will benefit various stakeholders including the farmers to take benefit of 'price discovery' and 'price risk management'.

Once the Bill is passed and enacted by the Parliament, Forward Markets Commission (FMC) as a regulator will get autonomy and thus the power to effectively regulate the market.

"The Forward Contracts (Regulation) Amendment Bill should be passed in Parliament at the earliest. The Bill will provide regulatory power to FMC to deal with regulatory challenges," FMC Member Rajeev Agarwal said.