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Cabinet okays futures trading in eight oilseeds, oils and cakes

Parkash Bhargava in New Delhi

The government has allowed futures trading in eight edible oilseeds, oils and their cakes in order to reduce wide fluctuations in prices between lean and peak season.

A decision to this effect was taken on Tuesday night by the Cabinet Committee on Economic Affairs, which was presided by Prime Minister Atal Bihari Vajpayee.

The futures trading has been allowed in the rapeseed/mustardseed, groundnut, sunflower, ricebran, cottonseed, coconut, sesamum and safflower.

A notification allowing the futures trading would be issued in the near future, an official spokesperson said today.

The CCEA has taken the decision as the oilseeds production in the country has increased significantly to around 250,000 tonnes in 1998-99 from the level of less than 15 million tonnes almost ten years ago.

In terms of oil, production in the current year is estimated at over nine million tonnes. India is more or less self-sufficient in edible oil following the launch of oil mission.

The spokesman said the government had allowed futures trading as part of the government's overall objective of liberalising the economy.

The step would help in stabilising the wide fluctuations in prices and would safeguard the interests of farmers, stockists and exporters and others involved in the trade of these commodities by providing hedging facility to minimise the risk of adverse price fluctuations.

The Forward Market Commission will regulate and formulate rules for forward trading in eight oilseeds and their products. The Forward Contract Market Regulation Act would be amended accordingly to allow forward trading.

A ban on forward trading was imposed in early sixties to check excessive speculation in all types of commodities.

Excessive speculation in these commodities was witnessed as the population was increasing while production could not keep pace.

According to official sources, initially, forward trading centres would be opened where the oilseeds are produced. For example, forwarding trading in groundnut and its products would be allowed in one or two centres of Gujarat.

The government has not allowed forward trading in soyabean and its products, which account almost 23 per cent of the oilseeds production in the country. Madhya pradesh is the major producer of soyabean in the country.

The groundnut production in the country is estimated around 8.78 million tonnes in the current year as against 7.85 million tonnes in the previous year. The rapeseed and mustardseed production is expected to be much higher at 6.77 million tonnes this year as against the previous year level of 6.53 million tonnes.

The Bombay Oilseeds and Oils Exchange president Navinbhai Shah has welcomed the decision of future trading allowed by the Central government in eight edible oilseeds, oils and their cakes.

Shah said that this is a step in the right direction as the oilseeds industry was facing price fluctuation in the absence of future trading. ''Futures will provide hedging facility to the all sections of the oilseeds sector,'' he added.

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