ISLAMABAD (February 25 2004): The Law Division has said that hedge trading was not against the Islamic mode of trade and it could be allowed for cotton trading, an official of the Food Ministry said on Tuesday.
The Law Division's observation followed fixing of an important meeting of the cotton sector stakeholders for February 26 in Karachi to discuss the possibilities of resuming hedge trading for cotton.
The government is considering pros and cons of hedge trading for cotton market for the last one year. The issue was discussed at length in a series of meetings at various levels. This resulted in formation of a committee to dwell on all the aspects of the issue.
The matter was also referred to the Law Ministry for its opinion some time in 2003.
Most of the stakeholders are convinced that hedge trading is inevitable in today's world when the international cotton market was based on this mode of trade.
The Pakistan Cotton Ginners Association (PCGA) had deliberated upon the issue in its meeting in Multan on Saturday and came to the conclusion that hedge trading was not against the interest of stakeholders.
PCGA Vice Chairman Haji Ibrahim told Business Recorder on Tuesday that the association had discussed the issue of hedge trading in detail in its last meeting and reached to the conclusion that the new mode of trading would not harm the ginners.
He said all the buying and selling in domestic market depends on New York rates, which were based on hedge trading.
Ibrahim said that hedge trading was also in practice in early 70s and then it was stopped.
Khwaja M. Shoaib, a progressive farmer from Multan, also supports the idea. He said that the new mode of trade would increase activities at the cotton market.
Federal Food, Agriculture and Livestock Minister Sardar Yar Mohammad Rind had told a meeting at the Karachi Cotton Association (KCA) that the government was considering to allow start hedge trading. He had hinted at giving KCA a role to start with hedge trading.