Not just in India, but globally too, futures trading has played havoc with food prices.

Food and Agriculture Minister Sharad Pawar is not giving up. At a time when internationally futures trading is coming under attack for the rise in food prices, Sharad Pawar continues to defend the futures market. "No plans to ban more goods from futures market," he recently stated, adding that the government's decision to suspend trading in four more commodities  soya oil, chana, potato and rubber  would not be extended beyond four months.

The decision to suspend future trading in these four commodities was taken by the Forward Market Commission, and is in addition to last year's ban on wheat, rice, tur and urad. The newly banned four commodities contribute up to 40 per cent on the National Commodity and Derivative Exchange (NCDX) and 10 per cent of the daily turnover on the Multi-Commodity Exchange (MCX).

Whatever be the share of the banned commodities in the futures market, the fact remains that futures trading is largely a game of speculation and no speculator is in the trade to incur losses. They obviously want more kill from the market.

Therefore, not only in India, globally too futures trading has played havoc with food prices. The UN Special Rapporteur on Right to Food Jean Zigler has in his report said that about 30 per cent of the price rise was due to speculations in international grain markets. Well, if that can happen globally why do we think that futures market has no major impact in boosting inflation in India?

You will say that the government appointed Abhijit Sen committee on futures trading has found little evidence that futures tend to drive prices up. Well, you are right. But if you were to carefully look at the composition of the committee, what the Sen committee has said now was a foregone conclusion at the time it was set up some 14 months ago. The committee was loaded with representatives from the futures market and what do you expect them to say? It is like the Genetic Engineering Approval Committee that comprises of pro-biotechnology industry experts whose interest lies in promotion of genetically engineered crops and foods.

Do you see the glaring contradiction? How can futures trading in India not impact inflation when it does so internationally? Well, as I said earlier it depends upon what kind of committee are you setting up and for what hidden purpose.

It is believed that futures trading helps in price discovery, which is based on a variety of parameters and expectation of farmers, consumers and traders. In other words, futures market is expected to provide farmers an economic price for his produce, thereby helping him overcome the risks. If this is true I see no reason why the United States should be paying a massive farm subsidy, including direct income support, to its miniscule population of farmers.

After all, the US has futures trading and has the world's biggest commodity exchange at Chicago. If all this was translating into higher incomes for the farmers then why should the US be pumping in more than $ 75 billion every year as agriculture subsidy?

As if this is not enough, the US Farm Bill 2008 provides for a massive subsidy support to the tune of $ 286 billion for the next five years. In the European Union, the situation is no different. In fact, EU happens to be the biggest provider of agriculture subsidy.

Farmers in America and European Union survive only on subsidy support. Withdraw agricultural subsidy and agriculture in both the trade blocks collapses like a house of cards. If futures trading has failed to work for the economic benefit of the US/ EU farmers I fail to understand how India expects to make it workable for its poor and subsistence farmers.

In India, over Rs 40 lakh crore is the cumulative value of the derivative market. And if newspaper reports are to be believed, another Rs 40 lakh crore is being traded illegally in what is popularly called "dabba" trading. Such is the level of speculations that what is being traded is often ten times more than what is actually being produced.

Take guar seeds for instance. CPM leader Sitaram Yechury tells us that the total production of guar seeds in the country is around six lakh tonnes whereas the volume of futures traded is 286 times more at over 1600 lakh tonnes. If you think this will help farmers in making price discovery and at the same time help in taming inflation I suggest you must immediately go to a psychiatrist.

The basic objective behind pushing futures market as the ultimate saviour of the farming community is the intention to dismantle the procurement system. Once the MSP is withdrawn and the procurement system dismantled, trade will look forward to extract its pound of flesh.

This is what happened at the time of Bengal famine in 1943, and if the same system had prevailed, India would have never emerged from the gallows of "ship-to-mouth" existence. The choice therefore is limited. As per the recommendations of the Standing Advisory Committee attached to the Ministry of Food and Consumer Affairs, there is an urgent need to ban futures trading in 25 essential commodities.