Government moves to empower commodity market regulator FMC

The government today introduced the Forward Contracts (Regulation) Amendment Bill, 2010 in Parliament after the union cabinet approved amendments to the Forward Contracts (Regulation) Act 1952, intended to empower the Forward Markets Commission (FMC).

Once Parliament passes the bill and enacted it into law, the commodity markets regulator, the Forward Markets Commission (FMC), will get autonomy and power to regulate the market effectively, an official release said.

The legislation will allow FMC to introduce new products like 'options' in the commodity market. This will benefit various stakeholders, including the farmers to take benefit of 'price discovery' and 'price risk management', the release said.

The proposed amendments to the Forward Contract (Regulation) Act 1952 include:

• Review of existing definitions and insertion of some new definitions;
  
• Changes in provisions relating to composition and functioning of FMC;
  
• Enhancement of the powers of FMC;
  
• Corporatisation and demutualisation of the existing commodities exchanges and setting up of a separate clearing corporation;
  
• Registration of intermediaries;
  
• Enhancement of penal provisions in the FC(R) Act;
  
• Permitting trading in options in goods or options in commodity derivatives; and
  
• Designating the Securities Appellate Tribunal (SAT) as the appellate tribunal for purposes of FC(R) Act and giving it powers to levy fee.

The bill also provides for exempting FMC form payment of tax on wealth, income and profits or gains; conferring powers upon the central government and issue of directions to FMC on matters of policy and power to supersede FMC.

While the markets in India have generally been liberalised from April 2003 and modern institutional structures are in being evolved, FMC is largely functioning in its traditional format. Many of the existing provisions of the FC(R) Act do not meet the requirements of evolving markets.

The Forward Contracts (Regulation) Amendment Bill, 2006 was introduced in the Lok Sabha on 21 March 2006. The bill has since gone through the process of consultation and examination, including that by the Parliamentary Standing Committee of the ministry and the ministry of consumer affairs, food and public distribution.