New Delhi [India], November 25 : Edible oil industry body has once again requested the government to reconsider resuming futures trading in internationally traded commodities like crude palm oil and crude soybean oil.
In December 2021, the Securities and Exchange Board of India (SEBI) suspended futures and options trading in seven agricultural derivatives, including the two commodities mentioned above.
Notably, India is the world's second-largest consumer and number one vegetable oil importer, and it meets 55-60 per cent of its needs through imports.
The Solvent Extractors' Association of India, recently sent a memorandum to the central government seeking reconsideration of the 2021 decision and directing SEBI to resume futures trading in all commodities or, at the very least, in internationally traded commodities like crude palm oil and crude soybean oil.
In the absence of trading on commodity exchanges, the industry body SEA argued that its members have faced immense challenges, including financial losses.
"The industry was hopeful that the suspension would be lifted to enable smoother operations, but the continuation of this restriction has further weakened an essential risk mitigation tool," the industry body said.
A robust futures market is crucial for price risk management, orderly development of agricultural markets, and providing reliable price signals to all stakeholders, including the government, opined SEA.
Since December 2021, the suspension of futures trading in seven agricultural commodities has been extended periodically, now until December 20, 2024.
Citing unnamed studies, SEA argued futures trading is not a significant driver of inflation.
"Absence of Future trading deprives the industry of essential hedging mechanisms and price discovery, exposing businesses to greater price volatility and disrupting operations. Moreover, the absence of futures trading also denies the Government crucial price signals, leaving an information gap," the industry body wrote in the memorandum.
In December 2021, India suspended futures and options trading in seven agricultural commodities -- chana, mustard seed, crude palm oil, moong, paddy (basmati), wheat and soybean and its derivatives.