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ShareMumbai: The 2008-09 economic survey has suggested lifting ban on some commodity future contracts, removal of proposed transaction tax and passage of Forward Contracts (Regulation) Amendment Bill, 2006, to strengthen the regulator.
"Lift the remaining ban on futures contracts to restore price discovery and price risk-management," the survey said on Thursday.
India has banned rice, urad, tur futures indefinitely, and suspended sugar futures till December 31, 2009.
"The vibrant agriculture markets including derivatives markets could provide an early sign of future prospect of the sector." The survey suggested a removal of a proposed tax on commodity futures trade. "Review and phase out of surcharges, cesses and transaction taxes such as commodities transaction tax (CTT)," it said. The move will ensure zero-tax regime in commodity futures trade, which would help attract more participation.
Former finance minister P Chidambaram, in the 2008-09 Budget proposed to introduce a transaction tax for commodities futures trades, called the CTT, similar to a securities transaction tax levied on equity trades. He had proposed a CTT to the extent of 0.017% payable by sellers on any sale transaction in futures and options, while the buyer will pay 0.125% for any sale transaction in options.
At present, a 0.125% tax is levied on all transactions of securities traded on stock exchanges and for derivatives, STT stands at 0.017%. In an effort to improve investment environment and induce growth the survey has suggested enactment of the Forward Contracts (Regulation) Amendment Bill, 2006. The bill, once enacted, will give more powers to the regulator Forward Markets Commission boosting trade and protecting investors, analysts said.
The act also ensures introduction of options and index trading in commodity futures market. The survey acknowledged the work of the regulator in enabling the farmers to hedge on commodity exchanges to manage price risk. The survey said there was a need to take spot electronic trading to Agricultural Produce Marketing Committees (APMCs) across India.
An electronic spot exchange would promote transparency and help real producers participate. "Extend spot commodity trading in electronic form to agricultural markets by involving APMCs," the survey said.
The survey has further sought to bring all market regulators under Securities Exchange Board of India (Sebi). "Bring all financial market regulations under Sebi with a view to encourage integrated development," the survey said.
