MC EXCLUSIVE Sebi may take steps to revive trading in agri-commodity derivatives

The government has been trying to link farmers with marketplace, and many initiatives have been taken in this regard, yet, derivative trading volumes at agri-commodity exchanges have been falling in recent years.

In an effort to revive derivatives trading in agri-commodities, market regulator Sebi is expected to form working groups to understand and address key concerns and increase volumes, Moneycontrol has learnt.

The government has been trying to link farmers with marketplace, and many initiatives have been taken in this regard, yet derivative trading volumes at agri-commodity exchanges have been falling in recent years. Market sources have said that to deal with this drop in volumes, Sebi is likely to form two working groups to look at the concerns and take steps.

One working group is likely to look into the issues of exchanges, brokers and participants, while another committee is expected to study and suggest resolutions for pain points raised by Farmer Producer Organizations (FPOs). Sebi Chairman Tuhin Kanta Pandey met stakeholders including commodity exchanges, brokers, commodity participants, and a few agri-promotion institutions on July 1 to understand the issues and find a way forward.

In response to a Moneycontrol query, Sebi said, “In a meeting held on July 1, 2025, Sebi chairman interacted extensively with various stakeholders in the agricultural commodities derivatives market, including Exchanges, Clearing Corporations, Farmer Producer Organizations, Brokers, Domain Experts, and Associations. The concerns and challenges faced by the stakeholders were discussed in depth along with possible steps to deepen the market.” The regulator further added, “To address the issues, Sebi is undertaking multiple steps, including forming working groups comprising representatives of the above stakeholders, who will suggest constructive solutions in a time-bound manner.”

Commodity participants have very high hopes after the recent meeting, it is leant. “The discussion was constructive, inclusive, and deeply engaging. Concerns and challenges faced by all stakeholders—including FPOs, brokers, and exchanges—were heard with sincerity and openness,” said Rakesh Jain, President, Commodity Participants Association of India (CPAI). Jain further added, “We are hopeful that this collaborative dialogue will pave the way for a robust and practical roadmap for the revival and sustained development of agri-commodity markets.”

As per one source, the Farmer Producer Organizations (FPOs) raised concerns regarding trading in turmeric, guar, gram, and mustard. Exchanges also spoke about reviewing various regulations that need a re-look.

Market participants have also requested for the restoration of the Commodities Market Regulation Department (CDMRD) for the policy and development of the segment. Earlier, there was a separate department within Sebi, with one Executive Director in charge. CDMRD was later merged with the Market Regulation Department in 2021 with the rationale that there was duplication of resources, as exchanges and brokers were mostly the same after universal exchange concept was implemented by Sebi. Industry insiders say policy measures slowed down after that, and frequent bans on the trading of agri-commodities spoiled the market sentiment.

Paddy (non-basmati), wheat, gram, mustard seeds, soybean, crude palm oil, and moong are still facing trading suspension. On December 19, 2021, Sebi directed exchanges with a commodity derivatives segment to suspend trading in derivative contracts for these seven commodities until December 20, 2022, which has been extended until March 2026.

Commodity participants are likely to commission a new study on the impact of agri-commodity derivatives and make another presentation to the Sebi and government to review the ban on these agri-commodities. Though no rationale was given for the banning of the seven agri-commodities, it is believed that inflation could have been a reason.

Experts say that beyond agriculture and metals, commodity derivatives trading has huge potential due to strong industrial demand. Commodities like cement, timber, bitumen, diesel, petrol, coal, sponge iron, iron ore, and freight services have not received much push, probably due to a lack of investor awareness, authentic research and data, and user-friendly trading platforms like mobile apps.

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As per SCRA regulations, the government and Sebi have approved 104 commodities for derivatives trading. Of these, 29 are cereals, pulses, and oil-related products. There are 13 spices, 12 metals, 10 energy-related products, 4 precious metals, and 3 each of fruits and dairy-poultry products. The remaining products include other chemical, agri and plantation-related items. Despite the government and regulatory push to launch such products, very few new products have been introduced, the most recent one being electricity futures which exchanges are gearing up to launch.