India is considering revoking a three-year ban on futures trading in seven farm commodities, including wheat and unprocessed rice, after studies found the steps were counterproductive, according to a person with knowledge of the matter.

A government panel recommended ending the suspension, after the findings showed that restrictions imposed in 2021 to tame costs had instead disrupted market-price discovery, the person said, asking not to be identified as the discussions are private. Local crop rates have also stabilised following fresh harvests, the person said.

A final decision will be taken by a group of ministers in Prime Minister Narendra Modi’s administration, which will then ask the Securities and Exchange Board of India to lift the curbs or extend them beyond the existing January 31 deadline. Emails sent to the finance ministry and the capital markets regulator weren’t immediately answered.   

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A revocation would be another step by the world’s leading grain and sugar producer to ease pandemic-era restrictions on several farm goods. After Modi this year won a third term, his government lifted a ban on export of some rice varieties, and sold grains from state reserves. 

India started its clampdown some three years ago to ensure a steady supply of grains for a welfare programme to provide free wheat and rice to about 800 million people, as inflation hit a three-decade high on rising food prices. It curbed exports of wheat, sugar and rice, discouraged hoarding, and imposed storage limits. The moves roiled world markets and angered local farmers.   

A study commissioned by SEBI concluded that the ban on agricultural commodities, including chickpeas, rapeseed, soybeans, green gram and crude palm oil, harmed both futures and spot markets, and prices continued to rise, the person said. The report also highlighted that every suspension led to greater trust deficit in the derivatives market, making it more difficult to attract investors, the person said.