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In its fight against food inflation, India, which is the world's largest importer of vegetable oils and one of the largest producers of wheat and rice, has decided to extend the temporary ban on trading derivatives in key agricultural commodities until the end of January 2025, Reuters reports.
For the first time, the restriction on futures trading in key agricultural commodities was introduced in 2021. The Securities and Exchange Board of India (SEBI) decided to suspend transactions on these contracts for a year, which was a significant step forward since futures trading was allowed in 2003.
Subsequently, the ban on futures trading was extended until December 20, 2023, and then until December 20, 2024.
In a notification published last Wednesday, SEBI announced that the temporary ban on trading futures contracts on soybeans and its products, crude palm oil, wheat, rice-paddy, chickpeas, urad, and rapeseed is extended until January 31, 2025.
"Instead of extending the ban for a year, as in the two previous cases, SEBI extended it for only one month. This is a positive sign. Perhaps futures trading will be allowed early next year," noted a dealer working in Mumbai for an international trading house.
Vegetable oil is an important industry in India. Resumption of futures trading will help importers manage their risks and agricultural producers get an idea of future prices for oilseed crops, believes B.V. Mehta, the executive director of the Solvent Extractors' Association of India.
India satisfies almost two-thirds of its demand for edible oil through imports, mainly palm oil from Indonesia and Malaysia, as well as soybean and sunflower oil from Argentina, Brazil, Russia, and Ukraine.
The government's decision had the greatest impact on the National Commodity & Derivatives Exchange (NCDEX), specializing in trading agricultural products, as well as the Multi Commodity Exchange of India (MCEI).
