India will suspend futures trading on some food items

Madrid: India may have to suspend trading in some food futures if parliament calls for it, Finance Minister Palaniappan Chidambaram said.

"If rightly or wrongly people perceive that commodities- futures trading is contributing to a speculation-driven rise in prices, then in a democracy you will have to heed that voice,'' Chidambaram said in an interview in Madrid.

Prime Minister Manmohan Singh's government is under pressure from communists and other allies to ban futures trading in cooking oil, sugar and other commodities, saying it stokes speculation and fans price increases. The government halted futures trading in wheat and rice last year and lentils in 2006 to check a surge in domestic prices of the commodities.

"The pressure is to suspend a few more food articles,'' Chidambaram said without identified the products.

A panel formed by the government under econ-omist Abhijit Sen to study the impact of futures trading on prices of staple foods, this month suggested maintaining the ban on rice and wheat. It didn't recommend a ban on any more commodities, saying there was no conclusive evidence to suggest futures trading contributed to price increases.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. Online trading in commodity futures in India started in 2003.

Domestic traders and producing and consuming companies are the main participants in India's commodity exchanges, compared with the 13 million individuals who invest in stocks. Overseas funds aren't allowed to trade in India's commodity futures.

Chidambaram said that India may have to live with "the current level of inflation for a few more weeks."

India's inflation accelerated to 7.57 per cent in the week ended April 19, the fastest pace in more than three years.