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New Delhi: India, the world's second-largest grower of rice and wheat, may retain curbs on trading the grains after extending a four-month ban on futures trading in soybean oil, rubber, potatoes and chickpeas to cool inflation.
The halt to futures trading in the four commodities has been extended to November 30, Anupam Mishra, director at the Forward Markets Commission, the commodity market regulator, said.
The decision came a day after a top official at the federal consumer affairs department, Yashwant Bhave, said it hadn't recommended prolonging the ban.
The Congress party-led ruling coalition halted futures trading in wheat and rice last year and lentils in 2006 to keep prices of food affordable.
Exports of rice, corn, wheat and cooking oils were also banned to tame prices. Prime Minister Manmohan Singh's government needs to curb inflation that's at a 16-year high as it faces elections in less than a year and higher prices can influence poll results.
"As long as inflation remains a concern, it would be difficult for the government to remove the ban,"said Naveen Mathur, head of Mumbai-based Angel Commodities Broking Pvt. "The market sentiment, already at a low, will take a further hit."
The ban on the futures trading was imposed on May 7.
"The decision to extend the ban has been taken as a measure of abundant caution," Rajeev Agarwal, member of the Forward Markets Commission, said in a telephone interview.
"They have taken into consideration the government's concern on inflation."
Turnover rises 40%
Natural rubber prices in India have risen 12 per cent since the ban was imposed in May, while soybean oil and chickpeas have risen four per cent each, according to data from commodity exchanges. Only potato prices have fallen 18 per cent.
The Multi Commodity Exchange of India Ltd and the nation's other exchanges may need at least one month to resume trading in the banned commodities as contracts need to be reworked and fresh approvals from the regulator are required, Agarwal said.
Turnover on India's 22 commodity bourses rose 40 per cent to Rs16.5 trillion ($369 billion) in the four months ended July from a year ago, according to the regulator. Trading value jumped 11 percent to $922 billion in the year ended March 31.
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