The Securities and Exchange Board of India (Sebi) is expected to extend the ban on futures trading in agricultural commodities by one year, a senior official told ET. The restriction was to end in March this year.

The move is aimed at controlling price volatility and speculation in essential agricultural products which affect food prices and inflation, the official said, requesting not to be named.

Higher food inflation forces consumers to spend more on staples, putting pressure on the government and compelling it to resort to extreme measures such as export restrictions, stock limits or imports.

The markets regulator had first imposed the ban in 2021, halting futures trading in seven agricultural commodities –non-basmati paddy, wheat, chana, mustard seed and its derivatives, soybean and its derivatives, crude palm oil and moong . The ban was for a year, aimed at combating rising inflation. The government has been extending it since then.

“Prices of agricultural commodities have been stable for a while and there is no need to disturb that,” the official said, adding that this was the main reason for the restriction to continue.

In the past, the government has received several requests from trading platforms to lift the ban, which according to the industry, will help farmers get better price for their produce.“There have been studies to show that the retail prices of none of these fell after suspension. In contrast, volatility in many of them rose after futures trading was suspended,” said an industry executive.

The studies also found that without futures contracts, farmer-producer organisations (FPOs) were not able to hedge against price fluctuations, making them vulnerable to market volatility, the executive said.