The government justified the workings of commodity
futures market in the country and gave a detailed description of its running in
the parliament.
In a written reply in Lok Sabha, Finance Minister
Arun Jaitley said the Forward/Future Market is not primarily responsible for
price rise. The commodity futures market is a mechanism for price discovery and
price risk management.
The price of any commodity is determined by actual
demand and supply position in the market. The futures market merely discovers
the likely prices of a given commodity at future points of time depending on
the expectations of supply and demand.
The intermediaries do not get large chunk of profit
of farmers due to Forward/Future Market. The future prices are discovered in a
transparent manner on the online platforms of the national commodity
derivatives exchanges.
The future market leads to reduction in seasonal
price volatility which leads to better price realization for the farmer at the
time of harvest. With the help of information on future price trends, and
probable supply and demand of various commodities, the farmers can plan their
cultivation as well as storage and sale of their produce in advance.
The Forward Markets Commission has implemented a
project to disseminate the future prices and spot prices by installing Ticker
Boards at important Mandis/Agricultural Produce Market Committees etc. Prices
are also being disseminated through SMS alerts and local newspapers. This has
helped to reduce the information asymmetry and enables the farmer in realizing
a better price for his produce from the intermediaries in commodity spot
markets.
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