Assess benefits before listing commodities on bourses: Sen panel

The Abhijit Sen Committee, set up to study the impact of futures trading on commodity prices, has suggested a close examination of the benefits to stakeholders before listing it in the futures market. The committee, however, failed to establish a clear link between price rise and futures trading, Sharad Pawar, minister of agriculture, consumer affairs, food and public distribution, informed the Lok Sabha in a written reply.

The committee also suggested that an assessment be made of the possibility of agencies implementing MSP, including FCI, acting as the writer of 'call' and 'put' options in agricultural commodities.

The committee analysed annual growth rate in prices of sensitive commodities (foodgrains and sugar) in pre-future period and post future period and concluded that although inflation clearly increased post-futures in some sensitive commodities that have higher weight in consumer price indices, it is not possible to make any general claim that inflation accelerated more in commodities with futures trading.

"Given these conflicting results from daily as against weekly and monthly data, no strong conclusion can be drawn on whether introduction of futures trade is associated with decrease or increase in spot price volatility."

In order to attract the hedgers, the committee suggested that the high basis risk in the future contracts be addressed.

It has also suggested that the delivery system in the national commodity exchanges should be broad-based and delivery charges on the exchange platform be brought down to promote deliveries.