``In a liberalising modern environment, commodity traders need to change their old mindset and make use of the hedging mechanism now increasinglypermitted by the Government,'' said FMC director SM Kolamkar.``Progressive withdrawal of the Government/public sector is a clear indication of the greater freedom to the market forces''.

Mr Kolamkar was speaking at the All India Cotton Trade Association's conference (in Vadodara) on `Cotton Crop Review and an Overview of Indian Cotton Contract'. He was referring to the not-so-satisfactory progress in commodity futures trading, in general on the 15-plus commodity exchanges in the country. However, the trading in parallel markets for some of the commodities, including cotton, oilseeds, gold among others, was rampant on the illegal markets.

Realising the need of hedging against various risks that emerge in a liberalised world, the Government has since 1998 - after a gap of over three decades - been relaxing its ban on trading in commodity futures. Till date, most of the commodities - barring bullion, sugar, tea, rubber and few others - are permitted to be traded on commodity exchanges. However, for various reasons, commodity traders and users have shied away from hedging their risks on the comexes, while trading in parallel informal, and illegal markets are thriving.

According to Mr Kolamkar, it is the ``old mindset which is responsible for lower volumes, on the commodity exchanges. It is this mindset which needs to be changed, may be initially by trying to hedge the lower portion of one's exposure followed by larger portions. But not participating in futures is no option to meet competition effectively''. Surprisingly, cotton traders and some of the mill owners present at the seminar seemed rather unconcerned, to the need of hedging their requirements.

There was however, the similar lone voice of East India Cotton Association (EICA) president Suresh A Kotak.

Since December 1998, EICA offers facilities to trade in cotton futures through its own Indian Cotton Contract (ICC). Said Mr Kotak ``Futures trading can be considerably strengthened through institutional particiption, although in the Indian context, farmer's participation is a distant goal, cooperatives of farmers can make a start right now.

Likewise institutions like the Cotton Corporation of India (CCI) andcotton mills can also stand to gain by trading in futures. I hope that they will come to realize the benefits from this tried and tested system for better management of risk and price discovery''. However, Mr Kotak lamented the continuation of cotton within the Essential Commodities Act (ECA) provisions which restrict freedom to trade in cotton futures.