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Ban on Wheat Futures Lifted

The government lifted the ban on the eve of general election results’ announcement

A two-year long ban on trading in wheat futures has been lifted by the government, after first being imposed in February 2007, which had been put in place after the country had witnessed a significant rise in wheat prices leading to popular discontent that was mirrored in the increasingly vitriolic stances of various political parties. The prevailing belief was that speculation in exchange traded futures had somehow caused the prices to rise, fuelling inflation.

Hitting the ground running are both the NCDEX and NMCE. While the former has already applied for launching new contracts, the latter said it was in the process of doing so. The Forward Markets Commission is the authorizing entity.

The ban has been lifted on the eve of the general elections results day, making it one of the last major decisions of the UPA government. Any major policy decision could not be taken by the government since the code of conduct was in place till Thursday while the general elections were being held. However, if the Left parties are part of the new government, or support it from outside, they may well ask for the lifting of the ban to be cancelled.

This comes as a good piece of news for traders as the country may well record a second consecutive year of bumper harvests. Wheat exports are likely to take off too now

The government has based its decisions on the recommendations of the Sen Committee report, which had been appointed to look into the connection between the futures trade and the rise in the prices of wheat. Led by Prof Abhijit Sen, the committee had favoured lifting the ban as it saw no linkage at all.

However, the ban on rice futures, urad and tur remains in place.