Agri trading ban: Farmers sit down for indefinite protest at SEBI headquarters

Farmers' indefinite protest at SEBI HQ on January 23

Scores of farmers sat down for an indefinite protest outside the headquarters of the Securities and Exchange Board of India (SEBI) in Mumbai on January 23, voicing their opposition to the regulator’s decision to ban trading in seven agro commodities on the exchanges.

In December last year, SEBI extended the ban on the trading of derivatives of paddy, channa, crude palm oil, mustard seeds and its variants as well as soya bean and its variants. The regulator’s move was aimed at reining in escalating prices. The trading ban, which will now stretch out till December 2023, has drawn the farmers’ ire, many labelling the move as ‘anti-farmer’.

The ban is being opposed on the ground that the bar on trading in derivatives leads to a situation where there is no real assessment of prevailing price levels while hedging options have also become inaccessible.
The protest is being led by the Swatantra Bharat party, which is the political wing of the Shetkari Sanghatana, a prominent Maharashtra-based farmer’s union founded by the firebrand leader Sharad Joshi. Joshi, a full-time economist before he became a farmer subscribed to the notion that farmers’ would never receive their dues unless their issues were forcefully raised.

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Joshi actively fought to secure farmers' access to technology and was a strong proponent of the open-market economy.  He was also at the helm of the massive agitation that called for the release of genetically-modified cotton in the country.

Several farmers' organisations, in the past, have argued that futures markets lead to better price discovery of critical agri commodities such as soybean, palm oil, cotton and others. In the past few years, farmer co-operative organisations have also started tapping the futures market for trading as well as hedging.

It isn’t just farmers alone who are opposed to the bar on the trading of derivatives in the seven agro commodities. The Commodity Participants Association of India (CPAI) in December last year also urged the regulator to resume trading in this space. The association also cited a number of studies to the regulator emphasising that commodity prices are dictated by demand and supply dynamics, and trading on exchanges has no perceptible impact on the prices.