Commodities market on Monday hailed finance minister Pranab Mukherjee's decision to abolish the Commodity Transaction Tax. "The budget announcement is visionary and good for the commodity markets. It will stimulate huge investment in the warehousing sector since the uncertainty of commodity market viability with respect to the cost of transaction has been removed," MCX director Anjani Sinha said.

"Now it will be on par with the top 25 global commodities exchanges, which constitute 99.99 per cent of the world's exchange traded commodity derivative volume," he added.

The abolition of CTT will boost another asset class, Dhanalakshmi Bank's managing director and chief executive Amitabh Chaturvedi said. It will provide a stimulus to market participation as many players were staying away from commodity futures due to this uncertainty.

"The abolition of commodity transaction tax is good news for the commodity futures market ... we are happy," said B C Khatua, chairman, Forward Markets Commission, the commodity market regulator, which was seeking withdrawal of the tax proposal. India's six-year old commodity futures market, which carried out trade worth Rs5,249 crore in 2008/09, was worried over a possible imposition of the proposed tax, which might have eroded trade participation.

"CTT was not being imposed as of now, but there was fear hanging on. .... It (abolition) will help in enhancing confidence of the investors in the market," said Dilip Bhatia, director, Kotak Commodity Services Ltd. The government had proposed CTT of 0.017 percent payable by sellers on any sale transaction in futures and options, while the buyer will pay 0.125 percent for any sale transaction in options.

The new government has initiated reforms in the battered commodity markets in the past two months by removing a two-year-old ban on wheat futures trade, and the abolition of CTT has cleared way for further reforms, officials said.

"The mention of CTT in finance minister's speech shows the government's inclination towards commodity reforms. Signal of reform itself will prompt more investments," said Anil Mishra, chief executive of Ahmadabad-based National Multi-Commodity Exchange.