Stakeholders demand laws to regulate commodities market
KATHMANDU, AUG 27 -
With business swelling at commodities exchanges, stakeholders have asked the government to create laws to regulate the sector. Currently, half a dozen commodities exchanges are in operation and 50 more have been registered at the Company Registrars’ Office, but there are no regulatory institutions overseeing the business.
“The government needs to formulate an act and appoint a regulator for the sector,” said Rameshore Prasad Khanal, economic advisor to the prime minister, speaking at a programme on Sunday. He added that a draft of the Commodities Act had been finalised some four years ago when he was at the Ministry of Finance. “But it has not been endorsed as there is no Parliament,” said Khanal.
Meanwhile, the Finance Ministry plans to appoint the Securities Board of Nepal (Sebon) as the regulatory authority of the commodities market. “The commodities market is of major importance in the economy as its plays a crucial role in stabilizing prices,” said Sebon Executive Chairman Babu Ram Shrestha. “It also helps producers and end-users of various agricultural goods to get the maximum benefit by eliminating middlemen.”
Daily consumables are traded at the commodities market. Businesses can make a forward contract and purchase commodities used as raw materials in their production units. “This will help them mitigate risks like possible shortages and price fluctuations,” said Dipendra Khatiwada, managing director of Mercantile Exchange Nepal.
However, lack of infrastructure like public warehouses has been an obstacle to the commodities market as delivery of the commodities does not take place in most transactions. “This has limited trading at the exchange to mere speculation which is not beneficial for the economy,” said Khanal. “The government must bring a public warehouse act soon to address the issue.” He added that an act would motivate the private sector to invest in such infrastructure which will be beneficial not only to the exchange but all the farmers in the country.
Likewise, commodities like gold and petroleum products — which are banned from being traded — are also being traded on the exchanges. Only Nepal Oil Corporation is allowed to import and sell petroleum products, while commercial banks have the sole authority to import gold.
However, Nepal Rastra Bank was found to be unaware of the trading in gold being done at the exchanges. “We have heard and read about it in the papers, but we do not have any official information or statistics,” said Min Bahadur Shrestha, executive director of the central bank. “Also, we are concerned about the foreign currency that is being used to finance trading in the exchanges.” He added that it would be easier for them to addresses all these issues after laws are made to regulate the exchanges.
Source: The Kathmandu Post
