In a significant move to position India as a key player in the global commodity trading arena, the Government of India has constituted an Expert Committee under the International Financial Services Centres Authority (IFSCA). This initiative aims to transform the GIFT International Financial Services Centre (GIFT IFSC) in Gandhinagar, Gujarat, into a premier global commodity trading hub. This strategic development aligns with India’s broader goals of enhancing its financial services ecosystem and attracting global business.
Detailed Analysis
The Role of IFSCA and GIFT IFSC
The International Financial Services Centres Authority (IFSCA) was established with the mandate to develop and regulate financial services within India’s IFSCs. The GIFT IFSC, located in Gandhinagar, Gujarat, stands as the country’s first operational IFSC, representing a milestone in India’s financial sector evolution. IFSCA’s goal is to create a globally competitive regulatory environment, fostering ease of doing business and attracting offshore Indian enterprises back to the homeland.
Commodity Trading: A Global Perspective
Commodity trading involves the buying and selling of raw materials and intermediate goods, forming a crucial part of the global financial landscape. Major international hubs like Switzerland, Singapore, London, Chicago, Dubai, Shanghai, and Rotterdam have thrived due to their strategic locations, robust financial services, tax advantages, and skilled workforce. These hubs serve as vital centers for economic activities, linking global trade flows and financial transactions.
Despite being one of the largest consumers and importers of commodities, India sees the majority of its commodity trades executed through these foreign hubs. Indian enterprises often prefer these established centers due to favorable regulatory and tax environments, access to global markets, and advanced financial infrastructures.
IFSCA’s Strategic Move: Expert Committee Formation
Recognizing the potential for GIFT IFSC to serve as a global commodity trading hub, IFSCA has formed an Expert Committee. Chaired by Mr. Rajeev Kher, former Commerce Secretary, the committee comprises distinguished members from various sectors, including finance, commodities, and legal expertise.
Committee’s Terms of Reference
The committee’s mandate includes:
- Exploring benefits for GIFT IFSC by establishing it as a commodity trading hub.
- Studying policies of leading global commodity trading centers.
- Proposing steps to promote GIFT IFSC by leveraging synergies within the financial services industry.
- Enabling merchanting trades through GIFT IFSC entities.
- Developing necessary legal, regulatory, and policy frameworks.
- Identifying priority commodity groups such as metals, energy, and agricultural products.
- Offering recommendations on other relevant matters.
Impact and Potential Benefits
Establishing GIFT IFSC as a global commodity trading hub is expected to integrate the Indian financial ecosystem with global trade flows. It will capitalize on synergies with major commodity hubs, attract international investments, and foster a competitive environment. This strategic positioning could significantly enhance India’s economic footprint in global commodity markets, encouraging businesses to operate within India and reinforcing the nation’s role in international finance.
Conclusion
The constitution of the Expert Committee marks a pivotal step towards positioning GIFT IFSC as a global commodity trading hub. By leveraging India’s strategic advantages and aligning with global best practices, this initiative aims to create a robust, competitive, and globally integrated financial ecosystem in India. As the committee’s work progresses, the transformation of GIFT IFSC could pave the way for India to emerge as a leading destination for commodity trading, boosting the country’s economic growth and global financial standing.
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International Financial Services Centres Authority
PRESS RELEASE
Constitution of an Expert Committee on positioning GIFT IFSC as Global Commodity Trading Hub
1. The Government of India has established the International Financial Services Centres Authority (IFSCA) with a mandate to develop and regulate financial services, financial institutions and financial products in the International Financial Services Centres (IFSC) in India. GIFT IFSC at Gandhinagar, Gujarat, is the maiden IFSC in the country.
2. The mandate of IFSCA is to develop a world-class regulatory ecosystem for financial products and services, with a focus on on-shoring Indian businesses, that have gone offshore, through establishing a globally competitive ecosystem by enabling regulations and through ease of doing business.
3. Commodity trading is a dynamic and essential component of the global financial landscape, including the physical buying and selling of various raw materials and intermediate goods. It is a vast and intricate market that plays a significant role in supporting economic activities and ensuring the availability of vital resources. Trading of goods involves financial aspect, and this industry thrives as much on the financial supply chain as it does on logistics. Increasingly, many investors and hedge funds are also actively participating in the commodity market.
4. Switzerland, Singapore, London, Chicago, Dubai, Shanghai, and Rotterdam are international commodity trading hubs. These hubs stand out significantly on account of their position as financial services center, strategic location, tax privileges, and the availability of a skilled workforce. These global centres have emerged as strong International Financial Centres owing to the significant synergies between financial services and commodity trading.
5. Although India is one of the largest consumption markets and largest importers for many commodities, majority of the commodity traders are executing trades from other financial centres rather than from India. Indian enterprises have established bases in the afore-mentioned trading hubs for a variety of reasons, including favourable tax and regulatory considerations, access to global markets, robust financial infrastructure and an internationally aligned legal ecosystem.
6. Enabling commodity trading in IFSC will facilitate business integration of IFSC financial ecosystem with global trade flows, capitalize on integration opportunities with major commodity hubs and attract global investment flows into IFSC, thereby helping IFSC grow competitively.
7. Considering the above, the IFSCA has set up an “Expert Committee on positioning GIFT IFSC as Global Commodity Trading Hub”.
8. The Expert Committee will be chaired by Mr. Rajeev Kher, former Commerce Secretary. The composition of the Expert Committee is as under:
|
Sr. No. |
Details of Committee Members | Capacity |
| 1. | Mr. Rajeev Kher Former Commerce Secretary, Government of India Former Member, Competition Appellate Tribunal | Chairperson |
| 2. | Mr. Subhash Chandra Agarwal, IRS Additional Director General, Directorate General of Foreign Trade (DGFT) Development Commissioner, GIFT City – SEZ | Member |
| 3. | Mr. Sanjay Kumar Executive Director and Chief Marketing Officer, Oil and Natural Gas Corporation Ltd. (ONGC) | Member |
| 4. | Mr. R V N Vishweshwar Executive Director (Corporate Finance and Treasury), Indian Oil Corporation Ltd. (IOCL) | Member |
| 5. | Ms. P Shanthi General Manager (Commercial), National Mineral Development Corporation (NMDC) | Member |
| 6. | Mr. Rajesh Somani MD & CEO, Global Smart Comtrade Pte Ltd., Singapore | Member |
| 7. | Mr. Ashok Gautam MD & CEO, India International Bullion Exchange IFSC Ltd. (IIBX) | Member |
| 8. | Mr. Kaveesh Syal Head of Operations, OVL Overseas IFSC Ltd. | Member |
| 9. | Mr. Bharat Gupta Senior Vice President & Head – Trade and Structured Finance, Asia, Europe, Middle East and Africa, Olam Global Agri Pte Ltd. | Member |
| 10. | Mr. Girish Bajaj Chief Treasury & Insurance, Tata Steel Ltd. | Member |
| 11. | Mr. Srinivas Tuttagunta Chief Operating Officer, Reliance Industries Ltd. | Member |
| 12. | Mr. Michael Skinner Global Head of Metals, Stonex | Member |
| 13. | Mr. Sachin Gupta Country Head & CEO, Trafigura India Pvt Ltd. | Member |
| 14. | Mr. Raman Walia Executive Director, Head of Commodities Sales, APAC, J P Morgan Chase Bank N.A., Singapore | Member |
| 15. | Mr. Manish Goel Head – Bullion Desk, ICICI Bank | Member |
| 16. | Mr. Jayesh K Shah Director and Chief Financial Officer, Arvind Ltd. | Member |
| 17. | Mr. V Lakshmikumaran Founder and Managing Partner, Lakshmikumaran & Sridharan Attorneys | Member |
| 18. | Mr. Suresh Swamy Partner, Price Waterhouse & Co LLP, GIFT City | Member |
| 19. | Mr. Pradeep Ramakrishnan Executive Director, IFSCA | Member |
| 20. | Mr. Ashutosh Sharma Chief General Manager, IFSCA | Member |
| 21. | Mr. Ramaneesh Goyal Deputy General Manager, Department of Metals and Commodities, IFSCA | Member Secretary |
9. The Terms of Reference (ToR) of the Expert Committee are as under:
a) To explore the potential advantages that could be derived to GIFT IFSC financial ecosystem by positioning GIFT IFSC as a Global Commodity Trading Hub (includes physical trade, Merchanting Trade as well as derivatives – OTC and Exchange-traded),
b) To study global policies, programs and policies of leading jurisdictions in this regard,
c) To propose steps to promote GIFT IFSC as a Global Commodity Trading Hub by studying how key global commodity trading centres operate, and specially identify areas with strong synergies for the GIFT IFSC financial services industry,
d) To explore enabling Merchanting Trades/Transactions through GIFT IFSC entities,
e) To develop legal, regulatory and policy frameworks, as well as incentive structures, necessary to position GIFT IFSC as a Global Commodity Trading Hub,
f) To identify key groups of commodities such as metals – precious / base / rare earth; energy / hydrocarbons; agricultural commodities, etc. that should be given higher priority for developing IFSC ecosystem, and
g) To discuss any other matters and offer recommendations relevant to the positioning of GIFT IFSC as a hub for Global Commodity Trading.
10. The constitution and Terms of Reference of the committee may be accessed at https://ifsca.gov.in/IFSCACommittees
Gandhinagar
May 22, 2024
