FCI, which buys food grains from farmers on behalf of the government, has no option. Instead of being a buyer of the last resort, which is its mandate, it has almost become buyer of the first resort. These symptoms were visible to the government for months, but it chose to do nothing.
Not even in the face of a ballooning food subsidy, which stood at Rs 43, crore in February estimates, 33 per cent higher than the budgeted figure. Ultimately, they did not take delivery, but they successfully hedged themselves in a crucial year when wheat had to be imported. A former official in the food ministry who was close to making the deal did not want to comment on it. Experts said they did not expect hedging mechanisms to become part of mainstream operations at food procurement agencies.
Big structural changes would be needed in the futures market before grain procurers set foot in it, starting with the amendment of the Forward Contracts Regulation Act of FCRA , experts said. The Forwards Contracts Regulation Amendment Bill of speaks of strengthening the forward markets regulator, corporatization and demutualization of existing commodity exchanges, and permitting trading in options, among other reforms.
There is hardly anyone trading wheat except for a few millers," said Kishore Narne, senior vice-president, Anand Rathi Commodities.
Options have to be allowed. Financial institutions and banks have to be allowed to trade in the futures market. Facing criticism over rising inflation, the government banned trading in wheat futures overnight in , reopening it only two years later. There is a base, Gati hasn't destroyed itself. But there is a lot of work to be done: CEO. Choose your reason below and click on the Report button.
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But Samir Mahindroo of Dow Jones Newswires , New Delhi, says fci will place only per cent of the total foodgrain available for futures trading. At present it places the same percentage of grains for sale under omss.
Hence, there should be no conflict between national and commercial interest. Till recently they were vying for increasing trading volumes through futures in grain, but fci 's entry has made them uneasy. Besides, they are not capable of handling sophisticated online futures trading," said an official at the nmce, wishing to remain anonymous. Though ncdex already has an understanding with fci to revitalise the latter's procurement, grading and trading processes, it's not exactly bullish on fci' s futures trading plans.
Sanvali Kaushik, vice-president, ncdex, says, " No decision on futures trading has yet been taken.
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