The Hindu Business Line : `Rubber Board does not favour ban on futures trade'

Bullish on futures `Indian growers get highest farmgate price' Dealers, tyre makers had called for ban Study Group supports firm price trend

Mr Sajan Peter

Chennai/Mumbai May 25 The Rubber Board does not favour any ban on futures trading in the commodity, according to Mr Sajan Peter, Chairman.

"We are not for complete ban of rubber futures. At the same time, we would like the futures to have a positive effect on the growers. They (growers) will have to get a fair idea of how prices will behave in the future," he said, when contacted on rumours that the Centre was toying with the idea of banning rubber futures.

Farmgate price

Stating that Indian growers get the highest farmgate price for rubber compared to counterparts elsewhere, he said: "The share of profit of intermediaries in rubber trade is very low. Therefore, futures actually do not contribute much to the growers' return. But futures trading provides an opportunity to the growers on the likely price trend."

The Board had called for a meeting of various players in the market a month back to discuss problems arising out of futures trade.

Rubber dealers and the Automotive Tyre Manufacturers' Association, the apex body of tyre companies that buy half the rubber produced in the country, had demanded a ban on futures trading.

Recommendation

They charged that it was mainly responsible for prices ruling high despite lack of any fundamental support. "The meeting decided that futures trading would ensure a positive impact on spot rubber prices," Mr Peter said.

"It was also decided to recommend to the authorities that they should not allow more than two per cent fluctuation in prices in futures."

The problem arose because a small number of large-scale holders were reported to have been behind the six per cent plus fluctuation in futures price in January, according to trade sources.

The Rubber Board had called for the meeting following complaints that the futures trade was being manipulated.

On Friday, the RSS-4 grade sheet rubber was being quoted at Rs 92 a kg. In the futures counter, June contracts for the grade ruled at Rs 91.70-91.80.

`No justification'

According to Mr Harish Galipalli, head of research, Karvy Commodities, there is no justification in the call for ban on rubber futures.

"Rubber for June delivery on the MCX on Friday registered a negligible turnover of Rs 44 lakh through just 49 trades, while July contract turnover amounted to Rs 15 lakh on 17 trades. How can such small trade stoke up spot prices?" he wondered.

"Rumours have become part and parcel of commodity futures trading ever since the Government banned rice, wheat, tur and urad without any basis," Mr Manish Thakkar, a commodity trader. "These rumours only add to volatility. Leave alone rubber, there is no documentary evidence to prove futures trading is pushing up prices of any commodity in spot market."

The latest International Rubber Study Group has also supported the current firm price trend.

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