Govt likely to clear bill with amendments
Facing accusation that forward trading in essential commodities has been fuelling inflation in the country, the government is likely to clear Forward Contract (Regulation) Amendment Bill-2010 with official amendments. A proposal to this effect is high on the agenda of the Union Cabinet, which will meet under the chairmanship of Prime Minister Manmohan Singh on Thursday.
Sources in the government said, “Since the parliamentary standing committee on consumer affairs, food and public distribution has submitted its report on the bill with certain amendments, the Union cabinet is likely to consider them and if agreed can approve the changes as official amendments.” The committee in its report recommended a doubling of the maximum penalty for trading rule violations to `50 lakh.
“The standing committee report suggested raising the upper limit on penalties for offences like insider trading to `50 lakh from `25 lakh stipulated in the government sponsored bill. Insider trading involves using unpublished price sensitive information for personal gain,” sources revealed.
The bill also seeks to empower commodity futures market regulator “Forward Markets Commission” on par with its securities markets counterpart SEBI. It is seen as the single-most important reform in the eight-year-old commodity exchange market.
The report has recommended that options be introduced for the benefit of stakeholders. The inclusion of the clause was one of the reasons why the bill in its earlier avatar during the UPA I regime faced resistance. Those who had opposed the bill then especially the Left parties argued that options would increase speculation in commodities.
The report, however, has suggested that options will actually make it easier for farmers and smaller users to participate in the derivatives market as trading lot sizes will be lower than in futures contracts, where the minimum traded quantity for most farm products is 10 tonne.
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