Commodity Online
The Chairman of the Multi Commodity Exchange of India (MCX) has warned on a significant loss of business if the Commodity Transaction Tax (CTT) is imposed.
“The imposition of a Commodity Transaction Tax (CTT) will have a retrograde effect on the commodity futures market. Almost all the business will be lost and trading will shift to dabba”, MCX Chairman Mr Venkat Chary told the Press Trust of India.
There is fear that dabba trading (informal trade activities) could account for about 150 lakh crore of the total Rs 170 lakh crore derivatives market, thus taking the business away from exchanges like the MCX, ICEX and NCDEX.
Both FICCI and ASSOCHAM have also expressed their concerns against the CTT with both bodies arguing that the CTT will discourage the participation of farmers in the commodity markets. Also, since the underlying asset of commodity derivatives is a global asset, imposing CTT would raise the cost of transaction in Indian exchanges, thereby triggering a volume shift from Indian exchanges to overseas exchanges.
India's ballooning fiscal deficit is forcing the government to secure additional source of revenue and with commodity trading seeing explosive growth over the past years, the huge volumes are expected to boost government cash inflows.
Meanwhile, MCX is expected to issue about 64.27 lakh shares on Feb 21, 2012 and with the CTT issue still uncertain, it remains to be seen if investors grab on the offer of sale or wait till a clear signal is received from the government.
