Decoding the Commodity Transaction Tax

By Kavaljit Singh | Briefing Paper # 10 | March 2013

On 28th February 2013, India’s Finance Minister P Chidambaram proposed a transaction tax on the commodity futures trading under the direct tax provisions in the Union Budget 2013-14. The commodity transaction tax (CTT) would be levied at 0.01 percent (Rs.10 for transaction worth Rs.100000). The CTT would be levied only on non-agricultural commodities futures contracts (e.g., gold, copper and oil) traded in the Indian markets. While the agricultural futures contracts would be exempted from CTT. The tax will be payable by the seller of futures contract.

Read More Download Now

Banking on Commodity Derivatives Trading: A Risky Proposition

By Kavaljit Singh | Briefing Paper # 9 | December 2012

On 10th December 2012, India’s Finance Minister P Chidambaram added a new clause in the Banking Laws (Amendment) Bill 2011 which was not part of the original amendments vetted by the Parliamentary Standing Committee on Finance last year. The new clause allowed the entry of banks in commodity futures trading in India. It also allowed mutual funds, insurance companies and institutional investors to trade in Indian commodity futures markets.

Due to strong opposition by several political parties on the grounds of violation of Parliamentary procedure, the government was forced to drop this clause from the…

Read More Download Now

Excessive Speculation and Market Manipulation: The Guar Futures Trading Fiasco

By Kavaljit Singh | Briefing Paper # 8 | September 2012

The recent guar trading scandal gives a peek into the murky world of Indian commodity futures markets and reveals how commodity exchanges are acting like casinos for speculators, moving away from their avowed objectives of price discovery and price risk management in an efficient and orderly manner. Guar (Cyamopsis tetragonoloba) is a drought resistant crop grown mainly in Rajasthan and parts of Haryana and Punjab.

Guar seed and guar gum prices rose at an extraordinary rate during the six months period between October 2011 and March 2012. On October 1,…

Read More Download Now

Renegotiating India’s Investment Agreements: A Policy Perspective

By Prabhash Ranjan | Briefing Paper # 7 | August 2012

There has been an exponential growth in International Investment Agreements (IIAs), signed by countries to protect foreign investments, in the last two decades. IIAs are treaties signed at the bilateral, regional or multilateral level by two or more countries to protect investments made by investors of respective countries. IIAs protect investments by imposing conditions on the regulatory behaviour of the host state.

This briefing paper examines the broad substantive provisions of Indian IIAs and suggests how these broad provisions can be narrowed so as to allow India exercise its regulatory space freely. The paper calls for renegotiating some of the…

Read More Download Now

Should Banks Be Allowed in Commodity Futures Trading?

By Kavaljit Singh | Policy Brief # 1 | August 2012

It may sound surprising to some people, but it’s true that banks are not allowed to trade in commodities in India. The banks are allowed to trade in financial instruments (such as shares, bonds and currencies) in securities market but the Banking Regulation Act of 1949 strictly prohibits banks (both domestic and foreign) from trading in goods and therefore they are not allowed to trade in commodity futures market.

The Section 8 of Banking Regulation Act clearly states that no bank…

Read More Download Now