Foreign players to enter commodity exchanges

Commodity exchanges are set to witness a sea change in the coming years with the government mulling to allow foreign investment in the sector.

According to officials, the government has arrived at a consensus on the foreign investment limit for commodity exchanges, which is set to be pegged at 49 per cent.

While the FDI limit will be capped at 26 per cent, FIIs can take up to 23 per cent. Also, a single player will be allowed to hold a maximum of 5 per cent initially.

Leading players like Nymex and Merril Lynch are interested in picking up stakes in commodity exchanges.

The proposal is likely to be taken up by the Cabinet soon. Officials said as per the proposal being worked out by the consumer affairs ministry, the government proposes to set the FDI limit at 26 per cent while the rest will be foreign institutional investment.

However, officials said, the individual cap of 5 per cent may later be relaxed to 10 per cent. Earlier, the consumer affairs ministry was keen on allowing individuals to hold up to 10 per cent stake.

But now it is likely to stick to the stock exchange model. If the government limits individual investors' stake at 5 per cent in the foreign investment policy on stock exchanges, foreign investors may have to bring down their stakes.

Since there was no policy on FDI in stock exchanges, the consumer affairs ministry had allowed these entities to pick up stake on case-by-case basis.