The Indian Vegetable Oil Producers Association (IVPA) is advocating for the removal of the suspension on oilseeds commodity derivative contracts, emphasizing that doing so would enhance price risk management and improve price discovery within India’s agricultural sector. The call for the lifting of the suspension comes after studies from economic institutions, including BIMTECH and IIT Bombay’s SJM School of Management, underscored the benefits of futures trading for the entire agricultural value chain.
Sudhakar Rao Desai, CEO of Emami Agrotech and president of IVPA, highlighted the significant negative impact that the prolonged suspension has had on India’s agricultural ecosystem, which comprises various stakeholders crucial to the country’s agri-economy. Desai emphasised that futures trading has historically facilitated better price discovery and crop planning, thus benefitting farmers and other market participants.
According to the study conducted by Sarthak Gaurav, Professor of Economics at IIT Bombay, the suspension of agricultural commodity derivatives has not effectively curbed price increases, nor has it significantly reduced market volatility. The study, which analyzed both secondary and primary data from Maharashtra, Madhya Pradesh, and Rajasthan, found that despite the suspension, the prices of suspended and non-suspended commodities remained high. Additionally, the analysis concluded that the role of commodity derivatives in price discovery and risk hedging remains critical, and the suspension has adversely impacted these processes.
Gaurav’s findings also suggest that the suspension has undermined market trust and disrupted decades of effort to deepen agricultural commodity derivative markets. He stated that regulatory risks, such as sudden suspensions, are counterproductive and hinder the effective functioning of India’s agricultural value chains.
In light of these findings, the IVPA urges regulatory authorities to lift the suspension on oilseeds commodity derivative contracts to ensure better risk management, price realization, and overall stability for the agriculture sector.