The Hindu Business Line : UPASI may launch tea futures by March-end

Mr N. Dharmaraj, Convener, UPASI core committee on tea futures, told Business Line that the online trading platform was ready and the recently-listed company was in the process of finalising its clearing and settlement house.

"We intend to kick-off futures trading in tea initially in South India but will look at extending it to Mumbai and Kolkata subsequently," he said. UPASI is the only producers' body to conduct futures trading.

The former UPASI tea committee chairman maintained thatthe main challenge in tea futures was in ensuring standardisation of production, given the variability of origin, agro-climate seasonality and production practices. To this extent, UPASI had done fairly well in giving it measurable specifications, he said. Trading would be done only in quality orthodox broken orange pekoe, CTC red dust and CTC pekoe dust tea.

Highlighting the advantages of tea futures, Mr Dharmaraj said it would lend greater stability to auction prices. "The spot market should gain by the price discovery and hedging mechanism possible in futures. The market will be less speculative as prices will be based on in-depth analysis. It will enable sellers and buyers (in auctions and ex-gardens) to cover their risks by taking counter positions in the futures market," he said.

For the exporter, it would help him quote a far more realistic price thus enabling him to secure export contracts in a competitive market.

The company has already commenced its membership drive. All sections of the trade — small growers, exporters, producers, corporate houses etc are eligible to apply for membership.

The exchange proposes to charge Rs 50,000 as admission fee, Rs 5,000 as annual subscription, Rs 1 lakh as trading security deposit and an additional Rs 1 lakh as VSAT trading charges. However, concession will be given to members of UPASI, tea associations and planters association if they bring in 50 members or more, sources said.

UPASI officials told Business Line that the exchange would stand guarantee for each and every contract. Buyer and seller will also have to pay a certain amount of margin money. For every lot of 500 kg, Rs 2,500 will be charged as security deposit. "In fact they are only paying 10 per cent of the total quantum," officials said. The margin money will be kept till the member squares off his position and gives guarantee of sale.

Futures trading will be marked to market and the exchange will also compute a settlement price every day. There will also be a ceiling on upward and downward momentum of prices and on the net open position of a buyer and seller.

The UPASI Commodities Exchange proposes to locate its tea futures back-office in Kochi with terminals at Coimbatore and Coonoor. As a precursor to the launch, workshops will be held at Coimbatore (on December 19) and Kochi to train them.

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