india extends future trading ban on key agricultural commodities until December 2024
Published on: October 28, 2023.
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India Extends Suspension on Futures Trading in Key Farm Commodities Until December 2024
India has decided to extend the suspension of trading in derivative contracts for key farm commodities in an effort to control food inflation. The suspension, which was originally ordered by the Securities and Exchange Board of India (SEBI) in 2021, was set to expire in December 2023 but will now continue until December 2024. This move comes as India, the world’s largest importer of vegetable oils and a major producer of wheat and rice, seeks to stabilize prices and ensure food security.
The commodities affected by this suspension include soybean and its derivatives, crude palm oil, wheat, paddy rice, chickpea, green gram, and rapeseed mustard. The decision has been met with disappointment by industry experts, who believe that a hedging mechanism is necessary for the Indian vegetable oil industry to navigate the global market turbulence. Currently, there is no such mechanism due to the absence of commodity futures.
It is worth noting that India heavily relies on imports to fulfill nearly two-thirds of its edible oil requirements, which amounted to a record cost of $20.8 billion in the financial year 2022/23. With a series of state elections scheduled for next month and a general election next year, the government aims to stabilize prices and ensure that food commodity prices do not increase.
The decision by the Indian government was not unexpected, as it has been implementing export restrictions on wheat, rice, and sugar to prevent further price increases. Some market participants believe that the government attributes the rise in food commodity prices to futures trading, which is why the extension of the suspension was anticipated.
This extension has had a significant impact on the National Commodity And Derivatives Exchange (NCDEX), which primarily trades in farm commodities. The Multi Commodity Exchange has also been affected by this government decision.
Overall, while the extension of the suspension on futures trading aims to address food inflation and stabilize prices, some industry experts believe that a hedging mechanism is necessary for the Indian vegetable oil industry. It remains to be seen how the market will adapt to this extended suspension and the implications it may have on food security in India.
Source: [Khaleej Times Article](https://www.khaleejtimes.com)
