The comprehensive bill, named Forward Contracts (Regulation) Amendment Bill of 1998, has been passed by Rajya Sabha and has been cleared by the standing committee on Food and Civil Supplies, headed by DP Yadav, MP. However, it is awaiting introduction in Lok Sabha.

Reacting to the budget for for the year 2001-02, he said allowing futures in sugar and spot in warehousing receipts were the right steps to boost economic viability and technical feasibility of such projects. But, he said, the proposals totally ignored the need for enacting a convergence bill for F&A sector on the lines of one suggested for telecommunication, information technology (IT) and information and broadcasting (I&B) sectors.

Mr Gupta, ex-president and director of Ahmedabad Commodity Exchange (ACE) says that such a legislation is pertinent for convergence between financial institutions (FIs) like RBI and NABARD and the regulatory authorities like Forward Markets Commission (FMC).

Speaking to The Financial Express, he regretted the lukewarm response of the concerned parties like FCI, CWC, STC and MMTC towards such a bill, necessary for regulating and bringing about transparency in the country's fragmented commodity exchanges, largely shrouded in secrecy and dominated by small players.

Describing the Budget as `commendable' considering the constrains of a coalition government, he said the proposals in the budget and Finance Bill 2001 reflected the ministry's knowledge, awareness and understanding of the F&A sector. But, apparently, several urgent issues that needed to be addressed to make the F&A sector vibrant and competitive in the international market have been ignored.

Although a mention has been made in the Budget about the integral role of warehousing in commodity trading, there is a need for financial support to storage activities, hedging and options and excluding commission or brokerage on contracts.

He pointed out how the chaotic condition in F&A sector was compounded by poor harvesting techniques, inadequate post-harvest infrastructure and presence of several layers of intermediaries between the farmers and storage houses. A large number of players leave an adverse effect on both the price and quality of the produce, making it difficult to form a lobby to ensure agricultural prosperity and food security.

He recalled that while the Forward Contracts (Regulation) Act of 1952 has been a forerunner to the Securities Contracts (Regulation) Act of 1956, ban on commodity futures for decades has dissuaded corporates or institutions to enter or develop expertise in commodity futures as they have been managing their commodity related activities in controlled/restricted regime.

He attributed the success of National Stock Exchange (NSE) largely to the FIs coming forward as promoters with right support from government agencies, with all sections of the stock market reposing confidence in the new institution for its viability and transparency. The creation of SEBI in 1988 followed by promulgation of an ordinance and subsequently enacting the SEBI Act in 1992 has also brought professionalism to the institution.

He also cited the example of the successful launch of self-regulatory Financial Services Authority (FSA) in the UK for stock and commodity markets to drive home hispoint.

The Forward Contracts (Regulation) Amendment Bill 1999, according to Mr Gupta, has several good features to boost the sector. The noteworthy among them are: Provision of increasing the period of regulating ready/spot delivery contract from 11 to 30 days, defining futures contract to clarify and distinguish between forward and hedge contracts, regulation of option in commodities, strengthening and making FMC broadbased by raising the number of members from four to seven, registration of brokers and enhancement of penalty for failures and defaults.