Sebi Extends Ban on Agricultural Commodities Futures Trading Despite Opposition

Sebi Extends Ban on Agricultural Commodities Futures Trading Despite Opposition

VoM News Desk | October 28, 2023 | 12:14 AM IST | Breaking News | Follow on Google News

Sebi Extends Ban on Agricultural Commodities Futures Trading Despite Opposition

Sebi Extends Ban on Agricultural Commodities Futures Trading Despite Opposition

In a recent official notification, India’s markets regulator, the Securities and Exchange Board of India (Sebi), has decided to extend the ban on futures trading in agricultural commodities for an additional year, until December 20, 2024. This move has been made despite opposition from the cabinet secretariat and the National Commodity & Derivatives Exchange (NCDEX).

The ban was initially imposed by the finance ministry through Sebi in 2021 as a measure to combat rising inflation. It halted futures trading in seven key commodities, including non-basmati paddy, wheat, chana, mustard seed and its derivatives, soybean and its derivatives, crude palm oil, and moong (green gram).

The ban extension in 2022, which faced protests from industry players and the NCDEX, raised concerns about its impact on farmers. It was noted that the ban was partly due to political considerations regarding food prices ahead of state and general elections.

Political and Economic Implications

This decision brings to the forefront a complex issue of political economy. It revolves around whether widely consumed agricultural commodities like pulses and rice should be allowed to be traded on the exchange, given their potential impact on food security. Proponents argue that trading aids price discovery and that the ban could lead to middlemen exploiting farmers.

Various stakeholders, including the NCDEX, edible-oil associations like the Solvent Extractors’ Association of India (SEA), the Indian Vegetable Oil Producers’ Association, the Mustard Oil Producers Association of India, and the Central Organisation for Oil Industry and Trade (COOIT), have expressed the need to lift the ban, particularly in the context of deflation in edible oils.

Rising Food Prices and Political Priorities

Notably, the prices of certain commodities, such as wheat, non-basmati paddy, chana, and moong, have been on the rise, possibly influenced by impending assembly elections. The government has emphasized food security and price control as crucial considerations during this period of political significance.

The move to extend the ban on agricultural commodities futures trading underscores the government’s focus on maintaining food security and stabilizing prices, especially as significant state and national elections approach.

VoM News Desk

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