The Hindu Business Line : NMCE unlikely to launch futures in petro products

UNLIKE the other multi-commodity exchanges, National Multi-Commodity Exchange of India Ltd (NMCE) would not be introducing futures trading in petroleum products.

According to Mr Kailash Gupta, Managing Director of NMCE, the board of directors is divided over the issue of starting futures trading in this sector. A section of the board members wants to go ahead with it but a majority of them are against.

The NMCE board consists of representatives of Punjab National Bank, National Agricultural Cooperative Marketing Federation, Gujarat Agro Industries Corporation Ltd, Gujarat State Agricultural Marketing Board, National Institute of Agricultural Marketing, Neptune Overseas Ltd and Central Warehousing Corporation.

"The general view is that the market is not yet ripe to start futures trading in crude oil because the imports of crude oil are not yet fully open. Apart from Essar and Reliance no one is importing crude oil," Mr Gupta told Business Line.

In such a scenario, he felt, that there was hardly any opportunity for the players to hedge their position in the crude oil import market. So there was not much of a need to start the futures trading.

"We want our exchange to operate in such a manner that it becomes a price determining mechanism. In the absence of players in the energy sector, we feel that our exchange would only become a casino and we would not allow it to happen," he said.

He was critical about the other multi-commodity exchanges that have started energy futures trading. "They are talking of surrogate hedging. I am not too sure, what is that?" he asked.

Mr Gupta, however, felt that futures trading in furnace oil could be considered but added that there should be a free market. According to him, futures trading in any commodity were irrelevant without a free market.

On the proposed expansion of the operations of NMCE, he said, some Delhi-based consultants were working on it. At present, the consultants are collecting and compiling data. The report is likely to be submitted to NMCE by next month.

Mr Gupta said NMCE was considering a two-phase massive expansion programme, which would include enhancement in operational efficiency and wider presence in other cities.

Currently, NMCE is registering a daily turnover of Rs 100 crore a day but Mr Gupta hopes it would increase to Rs 500 crore by the end of the current financial year, 2005-06.

bcaps12ptJute futures soon

The exchange hopes that it might restart the futures trading in raw jute, which it had suspended from December 15 following the Jute Commissioner's announcement of ceiling price.

Mr Gupta told Business Line that a lot of developments were taking place in several quarters but the results were yet to come.

In this context, he said Forward Markets Commission had sought details of the "affected parties" from NMCE following the suspension of the raw jute futures.

Asked whether NMCE was discussing the matter with the other multi-commodity exchanges, he said that sharing of information among these exchanges had not yet started. "Probably this is due to the competition among ourselves," he said.

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