An expert committee has submitted a report to the International Financial Services Centres Authority (IFSCA) with a strategic plan to position GIFT City as a global commodity trading hub. The committee, formed in May 2024, was tasked with addressing India’s fragmented commodity trading landscape and the significant ‘offshoring’ of trade, which limits India’s influence on global pricing and results in a loss of revenue and jobs. The report outlines several key recommendations to create a world-class trading ecosystem within GIFT IFSC, drawing parallels with hubs like Singapore and Dubai. The recommendations cover a wide range of areas, including regulatory enablement to notify commodity trading as a financial service and permit new derivatives, policy alignment to exempt traders from certain RBI restrictions, and significant banking and tax incentives. The committee also proposed infrastructure enhancements, financial innovations, and ecosystem development to attract international banks and traders. The IFSCA plans to review these recommendations and present them to the government, with the goal of aligning them with India’s long-term economic vision.
International Financial Services Centres Authority
PRESS RELEASE
Report of the Expert Committee on ‘Positioning GIFT IFSC as Global Commodity Trading Hub’ submitted to IFSCA
The global commodity trading landscape is a dynamic and integral part of the international financial ecosystem. For India, the strategic importance of commodity trading cannot be overstated. As one of the world’s largest importers of key commodities such as crude oil and metals, India remains highly exposed to global price volatility, supply chain disruptions, and geopolitical uncertainties. Unlike other major economies which actively mitigate these risks by investing in upstream assets and controlling significant portions of their supply chains, India has limited strategic leverage in international commodity markets.
2. Currently, India’s commodity trading landscape operates in a fragmented and sub-optimal manner. The absence of a globally competitive trading ecosystem within the country forces many large transactions and financial services to be routed through offshore jurisdictions. This ‘offshoring’ of trade not only limits India’s ability to influence global commodity pricing and policy but also leads to loss of valuable economic activity, employment, and tax revenues.
3. The Government of India established the International Financial Services Centre (IFSC) at GIFT City with the vision to “onshore the offshore” by creating a globally competitive platform for cross-border financial services. Positioned as a strategic financial hub, GIFT IFSC offers a conducive environment characterized by liberalized capital flows, favourable tax regimes, and robust governance standards. This makes it an ideal location to develop into a Global Commodity Trading Hub like Singapore, Dubai, Hong Kong, and Switzerland.
4. To explore this potential, IFSCA had constituted an Expert Committee on Positioning GIFT IFSC as a Global Commodity Trading Hub in May 2024. The Expert Committee was tasked with examining the enablement of commodity trading in IFSC and related aspects which 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, and make recommendations in this regard.
5. The Expert Committee has submitted its report and the same has been placed on the IFSCA website today. This report is the culmination of the Committee’s extensive deliberations, global benchmarking studies, and consultations with industry experts and stakeholders. It provides strategic recommendations aimed at building a world-class trading ecosystem in GIFT IFSC.
6. The recommendations of the Expert Committee include:
> Regulatory Enablement
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- Notify commodity trading including merchanting trade as ‘financial services’ under the IFSCA Act, 2019.
- Permit issuance and trading of OTC derivatives on commodities
- Expand the list of commodities on which exchange-traded derivatives can be launched
- Permit re-invoicing in IFSC
> Policy Alignment
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- Exemption of IFSCA-regulated commodity traders from RBI’s merchanting trade restrictions.
- Amend FEMA regulations to enable centralized hedging for commodity price risk for Indian group entities.
- Offer a Right of First Refusal (ROFR) to entities in IFSC for procurement by government
- Permit commodity trading entities within the IFSC to engage ships solely on voyage charter basis
> Banking & Tax Incentives
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- Making amendments in Banking Regulation Act to allow banks in IFSC to engage in broader commodity trading beyond bullion.
- Extend tax holiday for IFSC units from 10 to 25 years or till 2047.
- Introduce concessional tax regime for overseas professionals relocating to GIFT IFSC.
> Infrastructure & Logistics
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- Establish warehousing and logistics infrastructure near key ports.
- Exempt IFSC entities from customs filings for offshore transactions.
> Financial Innovation
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- Enable structured finance, securitization of commodity-based assets, and listing of trade finance bonds.
- Promote use of CBDCs for trade finance and enable funding against commodity collateral.
> Ecosystem Development
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- Attract overseas banks and financial institutions to IFSC.
- Engage with Indian diaspora of commodity traders to establish presence in IFSC.
- Develop advanced trading platforms integrated with global markets.
- Promote workforce development through incentives, facilities, and training.
7. IFSCA believes that aligning these recommendations with India’s broader economic vision of Viksit Bharat 2047—a developed India by the 100thyear of its independence will transform GIFT IFSC into a globally competitive hub, catalysing growth across supply chains, exports, logistics, and finance.
8. IFSCA will examine the recommendations made by the Expert Committee and take up the proposals with the Government of India and other agencies within the next few months.
9. The Expert Committee Report can be accessed at this
2nd August 2025
Gandhinagar
***
Project ACE
Activating
Commodity Trading
Ecosystem in IFSC
Report of Expert Committee
On
Positioning GIFT IFSC
as Global Commodity Trading Hub
August 2025
International Financial Services Centres Authority
Acknowledgements
The Committee extends its sincere gratitude to Shri K. Rajaraman, Chairperson, International Financial Services Centres Authority (IFSCA), for providing the Committee with an opportunity to make recommendations on positioning GIFT IFSC as Global Commodity Trading Hub.
The Committee is deeply appreciative of the continuous encouragement and guidance provided by Shri Pradeep Ramakrishnan, Executive Director, IFSCA and Shri Ashutosh Sharma, Chief General Manager, IFSCA. The Committee would like to place on record its deep appreciation for the excellent support and insights provided by the team from Department of Metals and Commodities, IFSCA, comprising Shri Ramakrishnan Padmanabhan – General Manager, Shri Ramaneesh Goyal – Deputy General Manager and Ms. Sonia Varma – Assistant Manager.
Lastly, the Committee extends heartfelt appreciation for the team at Price Waterhouse & Co LLP, comprising Mr. Suresh Swamy, Mr. Amit Bharatkumar Oza, Ms. Radhika Netravali, Ms. Nivitha N., and Ms. Lavisha Solanki, in organizing meetings, maintaining minutes, and assisting in the preparation of this report. Their coordination and extensive support were instrumental in the finalization of our recommendations.
Executive Summary
Commodity trading is a dynamic and essential component of the global financial landscape, supporting economic activities and ensuring the availability of vital resources. Its origins trace back centuries, evolving from ancient barter systems to sophisticated modern markets. The establishment of organized exchanges, such as the Dojima Rice Exchange in 17301, laid the foundation for today’s global commodity exchanges. Over time, these markets have become increasingly complex, shaped by technological advancements and the growing interconnectedness of the world economy.
Evolution of the Indian Commodity Market
India’s commodity market has also evolved significantly, transitioning from barter systems to organized exchanges. The journey began in 1875 with the establishment of the Bombay Cotton Trade Association. Today, the Indian commodity market is primarily driven by exchanges like the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX).
Shift of Major Traders to Global Hubs
In recent years, there has been a notable shift of major commodity traders from India to international hubs such as Dubai, Singapore, and Hong Kong. These global trading centers offer attractive locations, easy access to credit, seamless banking, favorable legal and regulatory environments, and fiscal incentives tailored to the needs of the commodity trading sector.
India’s Trade Dependency and Strategic Challenges
India is highly dependent on international traders for essential imports such as crude oil, making it vulnerable to global market fluctuations and geopolitical risks. Unlike China, which secures its supply chains by investing in upstream assets through state-owned enterprises, India lacks significant control over such resources, limiting its influence over supply and pricing.
Strategic Imperatives for India: Building Global Trading Hubs
To strengthen its position in global trade, India should prioritize the development of global trading centers and invest in upstream assets. Establishing trading hubs can streamline trade processes, attract foreign investment, enhance domestic competitiveness, and drive economic growth by providing the necessary infrastructure, regulatory frameworks, and financial services to support international commerce.
Alignment with India’s Vision of Viksit Bharat
The development of a robust commodity trading ecosystem is also intrinsically linked to India’s broader economic aspirations, particularly the vision of ‘Viksit Bharat’—a developed India by 2047. Trade, encompassing both exports and imports, is a cornerstone of economic growth. Exports drive development by opening new markets, generating revenue, enhancing productivity, and fostering specialization, while imports provide access to essential products, services, and technologies that may not be available domestically. This symbiotic relationship makes trade indispensable for sustained economic progress.
Over the past decade, India has demonstrated remarkable growth in its export sector. From 2013-14 to 2023-24, exports surged from USD 466.22 billion to USD 778.13 billion2, reflecting double-digit growth despite global supply chain disruptions, geopolitical tensions, and volatile commodity prices.
In 2024-25, India’s exports reached USD 820.93 billion3, underscoring the resilience and upward trajectory of India’s trade economy. Notably, the percentage of growth of exports to GDP has remained consistently positive over the years, and future projections indicate continued robust growth, with exports expected to reach USD 2 trillion by 2030, and ~USD 10 trillion exports and the economy targeting a USD 30 trillion milestone by 2047.
To realize these ambitious targets, India must focus on several strategic priorities:
- Global Integration: Deepen engagement with international markets to enhance liquidity, price discovery, and overall market efficiency.
- Economic Diversification: Broaden the economic base beyond traditional sectors to stimulate growth in emerging industries.
- Capital Contribution: Attract substantial capital inflows to support the infrastructure necessary for sustained growth.
- Foreign Participation: Encourage international players to participate in domestic markets, thereby deepening liquidity and fostering innovation.
- Export Competitiveness: Develop platforms that minimize price volatility and enhance India’s competitiveness in global markets.
Enabling commodity trading is a pivotal step toward achieving these objectives. By facilitating seamless commodity trading, India can attract international investors and traders, boost foreign investment, and enhance market liquidity. This influx of capital will help develop robust financial markets, stabilize commodity prices, and reduce volatility. A well-regulated trading hub will also improve price discovery, ensuring that prices accurately reflect market conditions and reducing the risk of manipulation. These advancements will benefit both producers and consumers by providing transparent pricing and fostering a fair-trading environment.
Opportunity for India: GIFT IFSC as a Global Commodity Trading Hub
The success of global commodity trading hubs has created an opportunity for India to position its first IFSC, established in GIFT City, as a Global Commodity Trading Hub. These competitive hubs have demonstrated the potential to tap into the vast and growing commodity trading ecosystem, and GIFT IFSC can leverage this by benchmarking against leading centers such as Singapore, Hong Kong, Dubai, and Switzerland.
Established in 2015, GIFT IFSC aims to ‘onshore the offshore’ by creating a favorable tax and regulatory environment. It is well-positioned to develop into a leading commodity trading hub by adopting best practices from established global centers.
In recognition of the potential and necessity of enabling commodity trading from IFSC, an expert committee was set up for Positioning of GIFT IFSC as a Global Commodity Trading Hub (hereinafter referred to as the ‘Committee’) in May 2024 to provide recommendations on establishing GIFT IFSC as a Global Commodity Trading Hub.
What should commodities cover
One of the key questions discussed by the Committee was the definition of “commodities.” Specifically, the Committee considered whether the term should be limited to raw materials or expanded to include processed, semi-processed, finished, or even branded goods. The recommendation is to adopt a broad definition of commodities.
Rather than maintaining a positive list—which would require continual updates—or implementing an approval mechanism to review each commodity traded (which could lead to procedural delays and hinder trader’s ability to respond quickly to market opportunities), it is suggested that a negative list approach be adopted. Under this system, all commodities would be permitted for trade except those specifically prohibited.
Naturally, there should be a general prohibition on commodities that are illegal to trade in India, those that threaten national safety and security, or those already barred from trading, such as items listed under Convention on International Trade in Endangered Species (CITES) and Special Chemicals, Organisms, Materials, Equipment and Technology (SCOMET). This approach would provide clarity, reduce administrative burdens, and support a more dynamic trading environment.
This approach will also align with the current practice. When an overseas commodity trader conducts business with India, the Indian importer is subject to local customs clearances and is permitted to clear only those goods which are allowed for trade in India. This fundamental process will remain unchanged even if the trader is now located in GIFT IFSC.
The key recommendations of the Committee are summarized below:
1. Regulatory Recommendations:
Enabling Commodity Trading:
1.1. Commodity trading contract should be notified as ‘financial product’ and commodity trading along with merchanting trade as ‘financial service’ by the Central Government under section 3(d)(vi) and section 3(e)(xiv) of the IFSCA Act, 2019.
Alternatively, commodity may be notified as ‘financial product’ and commodity trading and merchanting trade as a ‘financial service’ under section 3(d)(vi) and section 3(e)(xiv) of the IFSCA Act, 2019 respectively.
1.2. Simultaneously, other commodity trading related activities also need to be defined. Such activities include Warehousing and Commodity broking and these should be notified as ‘financial service’ by the Central Government under section 3(e)(xiv) of the IFSCA Act, 2019.
1.3. Commodity derivatives: IFSCA Act, 2019 inter alia includes ‘securities’ under the list of permissible financial products. Further, as per IFSCA Act, 2019, words and expressions used and not defined therein shall have the meanings respectively assigned to them in those Acts as mentioned in the First Schedule of the said Act. Currently, the Securities Contracts Regulation Act, 1956 (SCRA) governs commodity derivatives which notifies a list of commodities for issuance of derivatives. This list consists of only 104 commodities, bifurcated in segments and creates ambiguity in terms of the permissibility of issuing commodity derivatives with certain commodities as the underlying. Therefore, for the purpose of enlarging the scope of commodities on which derivatives can be issued, the power to notify such list of commodities may be vested with IFSCA for which necessary amendments can be made in SCRA. An amendment may be proposed in Section 2 (bc) of SCRA for this purpose.
1.4. Further, to enable issuance and trading of Over-the-Counter Commodity Derivatives by eligible participants in IFSC, an amendment to clause (ba) to section 18A of SCRA may be proposed on the following lines:
“(ba) regulated by the International Financial Services Centres Authority established under section 4 of the International Financial Services Centres Authority Act, 2019, in an International Financial Services Centre and issued by
(i) a Foreign Portfolio Investor, or
(ii) any financial institution set up in any International Financial Services Centres as far as the underlying for such contract is an eligible commodity/good as notified by the International Financial Services Centres Authority for the purposes of Commodity Trading.
2. Foreign Trade (Development & Regulation) Act, 1992: Units set up in the International Financial Services Centre (IFSC) are treated as foreign entities from a FEMA perspective. In other words, FEMA provisions do not apply unless these units interact with Indian entities. However, the Foreign Trade (Development & Regulation) Act, 1992 applies to IFSC units, making them subject to trade policies outlined in the Foreign Trade Policy by the Directorate General of Foreign Trade (DGFT).
DGFT’s notification dated February 29, 2024, defines merchanting trade as shipments between foreign countries without passing through Indian ports. To promote global commodity trading in IFSC, it is recommended that the definition provided by IFSCA should apply to such entities rather than DGFT’s definition.
3. Reserve Bank of India (RBI) regulations: RBI Master Direction on Import of Goods and Services4 imposes certain restrictions on merchanting trade such as the entire merchanting trade transaction (MTT) should be completed within an overall period of nine months and there should not be any outlay of foreign exchange beyond four months. Further, the trade should result in profit. In other words, loss trades are not permitted. Note that the commodity traders who will be set up as IFSC units will be treated as non-resident from an exchange control standpoint and ideally, would not be subject to the above regulations. However, if they are dealing with Indian banks having operations in IFSC (IBUs), those banks may still be guided by the above master directions. Therefore, it is imperative to clarify that these regulations do not apply to the commodity trader nor to the IBUs in IFSC.
4. Permissibility for hedging risks for the group entities: The Foreign Exchange Management (Foreign exchange derivative contracts) Regulations, 2000 allow units in Special Economic Zones (SEZs) to engage in commodity exchange contracts outside India to hedge price risks for export/import, but these contracts must be isolated from financial contracts involving their parent or subsidiaries. The Framework issued by IFSCA for Finance Company/Finance Unit undertaking the activity of Global/ Regional Corporate Treasury Centres (GTC Framework) permits finance companies in IFSCs to conduct derivative transactions to hedge risks on their books or those of group entities. However, finance companies/finance units in IFSC are required to adhere to the FEMA regulations where they render services to group entities in India. Therefore, finance units in GIFT IFSC aiming for centralized hedging for Indian group entities face constraints under current FEMA regulations. It is recommended that FEMA regulations be amended to facilitate GIFT City’s development as a global financial hub.
5. Permitting Banks in IFSC to undertake commodity trading: Banks in IFSC are restricted from trading in commodities, except for bullion and precious metals. This limitation prevents them from offering a full range of commodity trading and risk management services, making the IFSC less competitive compared to global financial centers like the UK and Singapore, wherein banks can trade a wider variety of commodities. It is recommended to allow banks in IFSC to engage in broader commodity trading which would enhance market liquidity, attract more participants, and support the development of a more dynamic and comprehensive commodities market.
6. Regulatory Framework: It is recommended that IFSCA issues a detailed regulation governing trading in commodities which could include provisions for requirement for licenses, standardized contracts, maintenance of books, records and furnishing accounts, conduct of commodity trading, risk management policies, monitoring mechanisms etc.
7. Permit re-invoicing in IFSC: It is recommended to permit re-invoicing for the trades pertaining to commodities to be carried out in IFSC. This will enable multinational commodity trading companies to centralize the billing and settlement functions.
8. Direct Tax Recommendations
8.1. Taxation Incentives: There is a need to clarify taxation policies beyond the 10-year tax holiday for entities in GIFT IFSC. To attract talent and investment, the Committee proposes extension of the 10-year tax holiday beyond 10 years to 25 years or at least till 2047 which aligns with India’s timeline of being ‘Viksit Bharat’.
8.2. Taxation of individuals shifting to IFSC: In order to attract experienced commodity trading professionals residing overseas to relocate to GIFT IFSC, it is recommended that individuals who are presently non-residents and who become resident of India only for the purpose of exercising employment with commodity traders in IFSC and carry expertise in certain areas as notified by IFSCA, should be taxed at concessional rates.
9. SEZ and GST Recommendations
9.1. SEZ Rules – Exemption from filing of documents: It is recommended that the SEZ Rules, 2006 be amended to exempt IFSC entities from filing customs documents (Bill of Entry, Shipping Bill, IGM, EGM) for transactions where the commodities do not physically enter Indian territory. This would significantly enhance the ease of doing business for IFSC-based commodity trading entities.
9.2. Establish warehousing and logistics facilities: It is recommended to set up dedicated zones for warehousing. Further, having dedicated areas of the ports such as Kandla and Krishnapatnam as deemed IFSC ports in order to enable third party exports and re-exports is recommended. It is recommended to enable provisions similar to Rule 19A of the SEZ Rules, 2006 for commodities as well. Separately, recommendation from the GST Council in the 55th meeting to expressly clarify that movement of goods within FTWZs will be exempt from the scope of “supply” should be implemented.
10. Other points for consideration
10.1. Financing Innovations: The Committee proposes several measures to enhance financial services in IFSC. Permitting pre-shipment credit from IFSC to support exporters seeking pre-shipment financing. Issuers should be encouraged to list Trade Finance bonds on IFSC exchanges as a dedicated financial product for commodity traders. To address regulatory ambiguities surrounding structured finance, a negative list of prohibited financing products should be established, allowing financial institutions to offer all other products. Additionally, enabling the securitization of commodity-based assets is recommended to provide additional market liquidity, with an appropriate regulatory framework to support such activities in IFSC.
10.2. Use of commodities as underlying to fund trades: Banks should fund trades using the commodities as the underlying security (similar to shipping finance), which is the norm for banks which fund global trades.
11. Macro Recommendations
11.1. Permissibility of voyage charters and Right of First Refusal (ROFR): It is suggested that commodity trading entities within the IFSC may be granted the opportunity to engage ships solely on voyage charter basis to effectively fulfill their trade obligations. Further, as an incentive, the Government should offer a ROFR for purchasing from commodity trading entities in IFSC vis-à-vis procuring from offshore entities.
11.2. Encourage overseas banks and financial institutions to establish presence in IFSC: The Committee emphasizes on encouraging overseas banks and financial institutions to establish a presence in IFSC to enhance supply chain finance availability for commodity traders. Additionally, banks in IFSC should be permitted to offer credit solutions at par with the options available overseas at competitive rates.
11.3. Entering into Free Trade Agreements (FTAs): India should enter into FTAs with various countries which would enable GIFT IFSC to offer commodity traders in IFSC seamless, barrier-free access to global commodities, enhancing competitiveness and attracting international traders. This would strengthen GIFT IFSC’s position as a premier trading hub and drive economic growth.
11.4. Promote Risk Management Products in IFSC: It is recommended to promote risk management products in the IFSC by facilitating the trading of futures, options, and other derivatives on the IFSC exchange to manage price risks. Further, commodity traders should be allowed to hedge risks on international trade exchanges, fostering a liquid and competitive market. Additionally, customization of OTC derivatives should be enabled to meet specific needs and credit risk instruments like credit default swaps should be available to mitigate counterparty default risks.
11.5. Central Bank Digital Currencies (CBDCs): It is recommended to leverage the potential of CBDCs to enhance trade finance. IBUs can leverage the programmability of CBDCs to provide a trusted, transparent and efficient supply chain solution to commodity traders in IFSC. By combining trade and payment information, the CBDC can be programmed according to payment conditions to become a new form of trade finance instrument.
11.6. Other Financial/ Risk Management Aspects: Promoting IFSC to become the gateway for India to attract global factoring companies to develop the factoring space in India is recommended. Promoting International Trade Financing Services (ITFS) platforms could also be encouraged from IFSC. Separately, IFSCA can consider conducting regular risk assessments of commodity traders to identify potential vulnerabilities and areas of concern. Furthermore, it should encourage and protect whistle-blowers and leverage advanced technology solutions to monitor trading activities and promote fair trade.
11.7. Build operational efficiency: The Committee emphasizes the development of advanced trading platforms integrated with international markets to provide seamless global trading opportunities. Additionally, it is recommended to leverage Public-Private Partnerships (PPP) models to attract investment and expertise from the private sector.
11.8. Reaching out to Indian diaspora of commodity traders: Indian commodity traders have established trading entities outside India due to factors like strategic location, infrastructure, favorable taxes, and regulatory environments. IFSC as a commodity trading hub can consider engaging with these traders, addressing their concerns, and encouraging them to open offices in IFSC.
11.9. Workforce Development: Creating an attractive environment for skilled professionals through tax incentives, quality residential and educational facilities, and continuous learning opportunities are recommended.
11.10. International Cooperation: Forming alliances with other global trading hubs, engaging in trade agreements, and collaborating with international financial institutions are proposed.
11.11. Combating Fraud in Commodity Trading: Emphasizing robust risk management and fraud prevention measures, the Committee recommends best practices such as avoiding circular transactions, verifying documentation, and leveraging technology for surveillance. Further, the IBUs in IFSC can consider using the recommendations made by the Swiss Trading & Shipping Association (STSA) as a baseline to reduce the potential for future losses and ensure the sustainability of commodity trading activities.
By implementing these strategies and leveraging its unique advantages, GIFT IFSC can position itself as a leading global commodity trading hub, enhancing India’s role in global trade and contributing to the country’s economic growth.
Read Full Text: Project ACE Activating Commodity Trading Ecosystem in IFSC
