By Thomas Kutty Abraham
July 6 (Bloomberg) -- India, the world’s biggest user of gold and the second-biggest grower of rice and wheat, ended a plan to tax trading commodity futures, luring more investors to a market that’s doubled to $1 trillion in the past three years.
The tax is being abolished on the counsel of Prime Minister Manmohan Singh’s economic advisory panel, said Finance Minister Pranab Mukherjee in his budget speech today.
India’s government in February last year proposed a tax of as much as 0.125 percent to gain from a surge in turnover. The duty wasn’t implemented after brokerages and the regulator said the levy may damp investors’ interest in commodity futures that had been reintroduced electronically in 2003.
“We would expect more participants to enter the market,” said Saurav Arora, senior vice president at Jaypee Capital Ltd., in an e-mailed statement. “This is a very good step, making it efficient to hedge cost effectively.”
Turnover on India’s Multi Commodity Exchange, the world’s third-biggest bullion bourse, and its local rivals may jump by at least a fifth in the year ending March 31, 2010, from 52.5 trillion rupees ($1.08 trillion) a year earlier, B.C. Khatua, chairman of the Forward Markets Commission, said June 23.
Multi Commodity Exchange, in which Fidelity International Ltd. and Citigroup Inc. own stakes, and the National Commodity & Derivatives Exchange Ltd., part-owned by Goldman Sachs Group Inc. and the Intercontinental Exchange Inc., are the nation’s biggest platforms for commodity trading.
Like in China, overseas funds and institutions are barred from trading commodity futures in India.
A futures contract is an obligation to trade a commodity at a set price for delivery by a specific date.
To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net
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