With the harvest season just a couple of months away and commodity prices, especially of foodgrain, showing a relentless upward graph, the government is seriously considering bringing in the Forward Contracts (Regulation) Bill, 2006, through the ordinance route.
The standing committee's report on the Bill was tabled today, the last day of the winter session of Parliament.
"Rather than waiting for the Budget session, the government is actively considering bringing in the Bill at least a couple of months before the harvest season so that the government procurement is optimum," said a source.
Among the main recommendations of the committee is one to ban trade in all agricultural products, especially grain, in commodity exchanges, including forward/future contract derivatives and options.
All tax sops with regard to wealth and income tax have also been withdrawn, according to the report of the standing committee.
The government had introduced the Bill in March 2006 to provide a regulatory structure to commodity exchanges, from where it had been referred to the standing committee.
The committee has also recommended that both spot markets, which are regulated by state governments under various Agricultural Produce Marketing Acts, and forward trading exchanges, which are regulated by central government rules, be brought into the Union or Concurrent List.
This is "to bring better co-ordination and synergy between spot trading and future markets," the report stated.
The committee also felt that hedge funds, banks, and provident funds should not be allowed to participate in these markets.
At the same time, the committee recommended that all players, direct and those operating through others like brokers, must disclose their interest in "actual, physical merchandising."
"Except for a small number, who have reasonable control over liquidity, no pure speculator with massive resources should be allowed to enter the market," stated the report.
The report also recommended that no foreign player be allowed to speculate in the Indian market, at least till the Forward Market Commission, the regulator proposed under the Bill, was well established.
Penalty clauses in the Bill have also been enhanced. Those accused of violating rules will now have to pay penalties ranging from Rs 25,000 to Rs 25 lakh (Rs 2.5 million).
