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Suresh P. Iyengar

Mumbai, March 5 After protesting against the commodity transaction tax (CTT)proposed in the Budget with market regulator Forward Markets Commission, the three national commodity exchanges on Wednesday—MCX, NCDEX and NMCE—made a joint presentation to Union Agriculture Minister, Mr Sharad Pawar, and the Secretary, Department of Consumer Affairs, Mr Yashwant Bhave.

“The exchanges persisted on dropping the CTT plan even as the Government wanted to implement and revise it later if there is an adverse impact,” said a source.

Mr Jignesh Shah, Managing Director, represented MCX, Mr P.H. Ravi Kumar, Managing Director, appeared for NCDEX and Mr S.S. Vyas, a senior official of NMCE was also present.

The representatives pointed out to the Union Ministry that the commodity derivatives market (CDM) was at a nascent stage and participation of banks, mutual funds, FIs, FIIs were not allowed.

The options contracts, index futures and futures based on intangibles were to come. Therefore, it would be better to let the market mature after enabling all types of instruments and participants and then tax it, rather than before it took off.

Sources said the cost of transaction would increase by about 800 per cent and of the total transaction cost, 85 per cent would be towards CTT and balance on account of exchange fee, service tax, stamp duty.

Analysts said the Indian exchanges would become the costliest in the world and thereby losing their global competitiveness. Commodity and currency markets were comparable and both these markets were very cost sensitive.

On Monday, the commodity exchanges took up the matter with the Forward Markets Commission (FMC) Chairman, Mr B.C. Khatua.

The exchanges are of the view that if the Government wants to impose trading tax in line with the securities transaction tax, then it should provide benefits offered in stock markets to commodity trading.

On his part, Mr Khatua has said the FMC would take up the matter with the Union Government and get the issue resolved before April 1.

More Stories on : Commodity Markets | Budget

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