An important proposal that will impact the commodity industry is the plan to merge commodities market regulator Forward Market Commission with capital market watchdog SEBI.

Finance Minister Arun Jaitley said “the proposed merger would help streamline the monitoring of commodity futures trading and curb wild speculation.”

This proposal is likely to bring convergence in regulation of various financial markets, such as securities, commodities and currency derivatives. Tracking of related money flows into such markets will also be easier. This will lead to implementing the long pending FCRA amendment bill. For brokers, substantial savings in costs are anticipated as separate set-ups for regulatory compliance may not be required.

Bullion Instead of a reduction of import duty on bullion, the Finance Minister proposes three schemes to reduce import of the metal. One is to use gold as an investment avenue rather than an ornament. A gold monetisation scheme, loans for jewellers in their metal account and developing an Indian gold coin are other ideas mooted by Jaitley.

Earlier, there were high expectations that the Centre may bring down the import duty of gold from 10 per cent to 2 or 4 per cent, which would have was anticipated to boost the domestic consumption of the yellow metal. The industry body had earlier submitted the recommendation to the Union Finance Ministry requesting to formulate a comprehensive gold policy to make India a global jewellery hub.

Expectations of abolition of the Commodities Transaction Tax introduced in the Budget of 2013-14 which had a dampening impact on commodities futures market was not considered in the budget. Commodities futures trading volumes had been affected severely since its introduction and the market participants largely expected the tax to be abolished or reduced.

Proposal to increase the import duty of natural rubber from the present 20 percent to 30 percent to support domestic farmers were also not considered. Since the international rubber prices are dropping, imports to India has seen several fold increase, which are driving down domestic prices to multi year lows. Proposal to increase the import duty on pulses were also not take into consideration.

The writer is Research Head, Geofin Comtrade Ltd

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