India's national commodity exchanges will have to now wait longer for the government nod for foreign direct investment.
It is unlikely that the Manmohan Singh government will come out with new Foreign Direct Investment norms for commodity exchanges before receiving the final report on futures trading from Abhijit Sen committee.
The term of the committee that the government has set up to study the impact of futures trading in agricultural commodities on price rise is being extended.
Planning Commission member Abhijit Sen heads the committee. It was set up in March to look into the impact of futures trading on prices of essential commodities, and thereby on inflation.
Though the committee was supposed to submit its report in two months - that is in May, officials said it has asked for an extension.
Officials in the Forward Markets Commission, the apex commodities regulator said that the Abhijit Sen committee has asked for an extension of two months.
"The committee's term is being extended. A notification to this effect will come from the Finance Ministry soon," the official pointed.
He said the new FDI norms will not come out before the Abhijit Sen committee submits report.
"We will it will take another six months before the government moves on the issue," the official told Commodity Online.
India's leading commodity exchanges - MCX and NCDEX - have been receiving overtures from foreign exchanges such as ICE and FIIs such as Goldman Sachs and Fidelity for picking up equity in them.
But no new FDI deal is possible for the commodity exchanges till the government announces shareholding norms for exchanges.
The government was forced to set up the Abhijit Sen committee in March after political parties accused futures trading in commodities as the main cause for the price rise in essential items, and the soaring inflation thereby.
Under pressure from politicians, the government has already banned futures trading in tur, urad, wheat and rice. Although a number of trade bodies, farmers associations and a section of political parties are pressurizing the government to ban forward trading in commodities, Prime Minister Manmohan Singh is said to be against the demand.
The prime minister, an economist by himself, is said to have told Planning Commission members recently that the futures trade in commodities is essential for a vibrant market.
But so far, political opposition to forward trade, which has been accused of fuelling prices of essential commodities, has hindered its growth prospects.
A Bill to amend the Forward Contracts Regulation Act, which is set to bring profound changes in commodity futures, is also yet to receive the Cabinet approval.
The Bill seeks to empower the FMC and make it an autonomous regulator and permit options and index-based trading in commodities.