The Lok Sabha debate on the Forward Contracts (Regulation) Amendment Bill and various arguments put forward by members to end the forward trading system indicate the way the wind is blowing. The Government thought it wise to modify the Act suitably to curb unhealthy speculation and other malpractices in forward markets for commodities. It must also be recognised that so long as the private sector continues to function and the bulk of the marketing of commodities and goods is allowed to be handled by private trading, forward markets have to exist. The first attempt to regulate and control the forward commodity markets was made eight years ago when the Act was passed with the setting up of the Forward Markets Commission which improved the working and the organisation of theses markets. But there some loopholes to be plugged to make the markets work in the best interests of the trade and the public. The FMC has endeavoured to achieve price stabilisation— essential to the success of the Plan, but its task at times has been hampered by conflicting policies of the Government and vagaries of weather which have prevented the normal supply of crops, thus leading to sharp price fluctuations. The functioning of the hedge markets no doubt provides facilities for easy marketing of the produce and helps in evening out the fluctuations of prices. Thus forward trading is considered an essential requirement of normal trade in commodities. However, trading quarters are not happy about the wide powers vested with the Forward Markets Commission to prevent excessive speculation and illegal trading. The Union Minister for Commerce Shri Nityanand Kanungo has assured critics that the powers would be used judiciously. When the amendments are written into the Statute Book, they will have far reaching implications. The FMC is being armed with certain powers of a civil court as well as the power to suspend any member of recognised association. A minimum penalty of a fine of Rs.1000 has been prescribed for any offence under the Act and a compulsory sentence of imprisonment is proposed for a second or a subsequent offence of a serious nature. During the last decade speculative activities in commodities have shown a marked decline as a result of several measures of control. The cumulative effect of all these measures will, however, mean a further strangulation of the trade which is bound to tell adversely even on legitimate activities.
12th December 1960.
