Our Bureau

New Delhi , Feb. 25

THE proposal to have a "unified regulator" for commodity futures markets and "all derivatives trading", articulated by the Economic Survey, has set off a cat among the pigeons with observers viewing it as the beginning of a turf battle between the Finance Ministry and the Ministry of Consumer Affairs and Food.

At present, the regulator for commodity futures exchanges — Forward Markets Commission (FMC) — is under the administrative control of the Ministry of Consumer Affairs and Food, whereas the equity markets are regulated by the Securities and Exchange Board of India under the Finance Ministry.

What the Survey has proposed is to have a unified regulator overseeing commodity futures as a part of all derivatives trading. This is similar to the situation in the US, where the Commodity Futures Trading Commission regulates both equity as well as commodity derivatives, while the Securities Exchange Commission oversees the spot equity market.

According to the Survey, the convergence between commodity futures markets and other derivatives markets would "induce economies of scale" and "help in the utilisation of capital investments and institution building, which has taken place for the derivatives markets, for the purposes of India's agricultural sector."

The proposal to have a unified regulator for all derivative transactions has taken officials in the Ministry of Consumer Affairs by surprise.

When asked about their views on the issue, a senior Consumer Affairs Ministry official said, "There is nothing for us to comment. These are questions that should be asked to the Finance Ministry."

The official said that as of now, the work was to strengthen the FMC, which is in the process of hiring about 39 senior level staff and upgrading its systems.

And now the Finance Ministry is talking of an altogether separate, unified regulator for all derivatives trading.

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