The Forward Contracts (Regulation) Amendment Bill ( FCRA bill) was, at long last, introduced the Lok Sabha on Monday by food MoS K V Thomas . The proposed amendments, long awaited by commodity participants in the country, are expected to restructure and strengthen the Forward Markets Commission or FMC on the lines of the Securities and Exchange Board of India (SEBI).

That the government is keen on pushing through the bill is viewed as a categoric sign that the era of futures trading ban on commodities on the contention that this encouraged speculative hoarding and unusually boosted commodity prices has passed. At present, the ban still persists on rice, urad and toor dal. Ftures trading in toor was suspended in 2007 against a backdrop of sharp rise in prices but is expected to be resumed by this year end. Currently, Chana dal is the only pulse variety being traded on the commodity exchanges. Recently, the FMC allowed the ban on sugar futures to lapse and new contracts are to be launched this month.. Political opposition to futures trading especially in agri commdities had stalled the forward progression of the crucial FCRA bill thus far.

The new bill. pending for as long as 12 years, is seen as essential for the development of the commodities futures market as it strengthens the regulator by arming it with financial autonomy. It also facilitates the entry of institutional investors and introduction of new products for trading such as indices and options. Currently FMC, which oversees 4 national and 17 regional commodity bourses, permits only futures trading in commodities. The regulator is overseen by the Ministry of Consumer Affairs , Food & Public Distribution.

The statement of objectives of the Bill said that the amendments were motivated by “growing demand for allowing trading in options and new generation of commodity derivatives, so as to provide wider opportunities for risk management.”

Business at the seven-year-old commodity futures market is expected to grow by about 30% to over Rs 90 lakh crore this year buoyed by increased demand for safe-haven assets — gold and silver , according to the industry body Commodity Participant Association of India (CPAI), making it that much more crucial for fair trade practices to be enforced in the markets. CPAI. Last year, the business of four national — MCX , NCDEX, NMCE and ICEX and 19 regional commodity bourses stood at Rs 70 lakh crore despite a futures trade ban on few commodities then.

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September 2021