The Hindu : Business : FIIs to be allowed in crude futures

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Friday, Jun 09, 2006

Business

Business

FIIs to be allowed in crude futures

Special Correspondent

Close watch on sugar, wheat prices

— PHOTO: RAMESH SHARMA

WIDENING COVERAGE: Union Minister of State for Consumer Affairs, Food and Public Distribution, Akhilesh Prasad Singh (centre), with the President, Assocham, Anil K. Agarwal (right), and Mission Director, USAID-India, George Deikun, at the second annual commodities conference in New Delhi on Thursday.

NEW DELHI: The Central Government will shortly allow foreign institutional investors (FIIs) and mutual funds to trade in crude oil and bullion in commodity futures market to provide a fillip to the growing commodities sector, S. Sundareshan, Chairman, Forward Markets Commission, said here on Thursday.

The commission was is not opposed to speculation in futures markets, but would certainly not permit artificial jacking up of commodity prices that would affect average consumers, Mr. Sundareshan said at the second annual commodities conference here, organised by the Associated Chambers of Commerce and Industry of India (Assocham).

The FMC chief said the commission was trying to evolve a mechanism wherein farmers, either in groups or cooperatives, could take part in the commodity futures trading so that they could benefit from price discoveries and risk coverage.

Declaring categorically that the commission was keeping a close watch on price movements at the commodities exchanges, particularly in the case of essential commodities like wheat and sugar, he said there was no abnormal price rise in wheat and sugar in recent months and whatever upward movement took place in these two commodities was quite in sync with the market trend. He asked the exchanges to improve their performances in physical delivery of the contracted commodities even as the regulator was working to make the existing delivery mechanism more widespread.

The FMC, he said, was seriously looking at the issue of overlapping of commodities at the exchanges as "we want each exchange to specialise in a particular commodity or set of commodities for deriving competitive advantages.''

Favouring a five per cent penalty for defaulting in case of compulsory physical delivery, he said this norm should strictly be followed for ensuring success of the exchanges.

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