INDIAN INSTITUTE of Management, Lucknow organised a two days Training Seminar on Commodity Futures Market on January 27-28, 2011, sponsored by the Forward Market Commission, Ministry of Consumer Affairs, Food and Public Distribution, Government of India, for senior state Government Officials belonging to the Departments of Civil Supplies, Agriculture, Agricultural Marketing, Information Technology and the Heads of State Agricultural Marketing Boards.
The programme aimed at enhancing basic understanding of commodity markets among the participants. Experts from NCDEX, MCX and IIM Lucknow faculty members explain commodity market operations and market dynamics, future market instruments and trading system in futures market, and various price risk management strategies. The programme is being co-ordinated by Prof. Sushil Kumar and Prof. Jabir Ali of IIM Lucknow.
India’s market for agricultural commodities, particularly food grains, is highly regulated by the government in many ways. In the process of economic liberalisation and privatisation, it was felt that there is a need to reform policies and regulations in agricultural commodities. The Khusro Committee (1980) recommended reintroduction of futures trading in most of the agricultural commodities. Subsequently, the Government of India constituted one more committee headed by Prof. K.N. Kabra in June 1993 on Forward Markets, which again emphasized the introduction of futures trading in 17 commodity groups covering wide range of agricultural commodities. It also recommended strengthening of the Forward Market Commission and suggested various amendments in Forward Contracts (Regulation) Act 1952 to bring fairness and efficiency in future trading operations. The National Agriculture Policy announced in July 2000 envisaged external and domestic market reforms by putting in place a mechanism of futures trade/ market and dismantling of all control and regulations in agricultural commodity market. As a result, the Government of India issued notifications on April 1, 2003 and permitted futures trading in a wide range of agricultural commodities except options trading. At present, there are 4 national level commodities exchanges: National Multi-Commodity Exchange of India (NMCE), National Commodity and Derivatives Exchange Ltd (NCDEX), Multi Commodity Exchange of India Ltd (MCX), and Indian Commodity Exchange and 21 regional exchanges allowed for derivatives trading of agricultural commodities. But, within four years of its introduction, future trading again got banned by the government in February 2007 for a number of agricultural commodities considering that the future trading was causing rise in inflation. In such a scenario, senior state government officials need to understand the nuances of commodity futures market in agricultural commodities and appreciate its role in liberalized market economy. Literature on futures market suggests that the commodity futures market enhances market efficiency in terms of price discovery and risk management on one hand and diversification of agricultural production due to proper dissemination of futures price and market information, on the other. "Considering inefficiencies in existing marketing system for agricultural commodities, the role of futures market needs to be explored for the benefit of the farming community at large", says Prof. Sushil Kumar, Program Coordinator, Indian Institute of Management, Lucknow.
