TOOL FOR PRICE DISCOVERY: Sharad Pawar (left), Union Minister of Agriculture, Consumer Affairs, Food and Public Distribution, inaugurating the Fifth National Conference of Commodity Exchanges in Mumbai on Saturday. S. Sundareshan (centre), Chairman, Forward Markets Commission, and L. Mansingh, Secretary, Department of Consumer Affairs, look on. — Photo: Shashi Ashiwal

MUMBAI: The Union Minister for Agriculture, Consumer Affairs, Food and Public Distribution, Sharad Pawar, on Saturday said once the proposed amendments to the Forward Contract Regulation Act are carried through, it will strengthen and restructure the Forward Markets Commission (FMC) and make it an autonomous and independent regulator.

"The regulator will have enhanced regulatory and penal powers. The amendments also provide for setting up of a Forward Markets Appellate Tribunal on the lines of the Securities Appellate Tribunal (SAT) set up under the Securities and Exchange Board of India (SEBI) Act," said Mr. Pawar while inaugurating the Fifth National Conference of Commodity Exchanges.

The Government is focusing on complete overhauling of Acts such as Essential Commodities Act, and Prevention of Food Adulteration Act for facilitating better internal trade in commodities.

The proposed Warehousing (Development and Regulation) Bill in Parliament would provide a legal framework for making the warehouse receipt a fully negotiable instrument. It also provided for setting up of a system to enforce accreditation of warehouses, a system of quality certification and grading of commodities with a view to protecting the interests of those holding warehouse receipts against negligence and malpractices, said Mr. Pawar.

Farmers' issues

"I have also taken up with the State governments issues relating to removal of multiple levies and taxes, designation of a nodal agency for dealing with issues related to internal trade and commerce and revamping the Civil Supplies Department by giving it a new role and orientation in respect of the movement of goods. Some of the State Governments have responded positively," Mr. Pawar said.

"One of the issues in which I will personally be interested is to ensure that the farmers who are the ultimate stakeholders, should derive the benefits of these markets. Commodities futures markets should not have the image of a speculators' market. They should rather act as a tool for risk management and price discovery for the producer as well as the consumer. These markets can play a vital role in equipping the farmers better to deal with uncertainties arising out of vagaries of the weather," he said.

"We have to empower the farming community by supplying them with the correct and latest information about the prospective prices of their crop. It is also necessary to transmit future prices to farmers in time. Efforts are being made to create necessary infrastructure for dissemination of spot and future prices to millions of farmers", Mr. Pawar said.

The farmers would need the help of aggregators at the grassroots level to help them enter the commodity derivatives market and enable them to reap the benefit of price discovery and risk management.

"Commercial banks, co-operatives and rural banks can play a significant role in this regard. We have taken up this issue with the Reserve Bank of India," said Mr. Pawar.

"The participation of commercial banks, mutual funds and foreign institutional investors would increase liquidity and bring depth in the markets "but at the same time increase the regulatory burden of FMC," he said.

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