Ramesh Abhishek,IAS,chairman,Forward Market Commission (FMC),which regulates the biggest market in terms of volumes commodity futures says excessive speculation has come down drastically and futures prices are now lower than spot prices. In an interview with George Mathew,the FMC chief says hes looking for more transparency. Excerpts: Has the truant monsoon impacted the futures commodity markets? Ultimately the prices in the market are decided by the fundamentals of demand and supply. When rains are deficient in some parts,it affects the supply outlook. Of late,it has been raining and the market is showing the improved situation. In June and July,prices were under pressure because of deficient rain,but in the last one month,there has been a perceptible change. It is reflected in the futures price also. In fact,prices have gone down in many commodities. What are you doing to ensure that prices dont shoot through the roof? In June and July,price volatility was quite high. And to check the volatility,we took a number of measures and increasing margin is one of them. We had doubled the margins to 10 per cent on seven essential commodities. In April,we also reduced the position limit of some commodities because there was estimate of lower production. We have now made position limit across all exchanges. Earlier,there was position limit for each exchange. This also reduced the scope for speculation. We have reduced the special margin on some commodities like potato,soyabean,etc,. What does it indicate when you say futures prices are lower than spot market? It shows that the futures market is under a lot of pressure. It can be an indication that fresh crop may be coming in a particular commodity. We have kept the futures market under a tight leash so that it should not play havoc in the spot market. Which commodity futures are lower than spot prices? If you see the futures prices in July and September,you will see lower futures prices in castor seed,chilly,cotton cake,coriander,jeera,maize,potato,sugar and soyabean. Except for three or four commodities,all futures prices are lower than spot prices. How do you tackle excessive speculation? The fall in futures prices is due to many factors like the actions we have taken,demand-supply position and recently we introduced the staggered delivery system which has been a radical measure. In the last 15 days,any seller can give delivery. So if prices are going up,seller will give delivery as hes incurring a loss. This has reduced naked speculation. Theres a perception that commodity future market is functioning like a casino. This is not a casino. If the market goes up and down,its because of fundamentals and not because of manipulation. If the market is not regulated properly and theres excessive speculation and very little hedging,it has the potential to disturb the physical market. Whats important is that this market is properly regulated so that this doesnt influence the physical market. We are looking for more transparency in the market. There are reports of dabba trading in various places. Are you aware of it? Its suspected that dabba trading takes place in many parts of the country. Basically,its the state police that has to take the action. The FMC has done several programmes with the state police. We have done that in 7 or 8 states. When the FCRA act is amended,we can have our own investigative unit.
