The Hindu Business Line : Commodity exchanges may lose Rs 600 crore a day

Mumbai, May 8 The Forward Markets Commission’s move to suspend futures trading in Chana (gram), soyabean oil, rubber and potato till September 6 is likely to chop off nearly 10 per cent of the trading volume in the three main commodity exchanges in the country.

These four commodities account for a trading volume valued at nearly Rs 15,000 crore every month (Rs 600 crore daily) out of the total volume estimated at Rs 1,64,080 crore (about Rs 6,500 crore daily). This is going by the latest data available on the Forward Markets Commission Web site.

According to the data, during April 1-14, soyabean oil made up over Rs 3,000 crore, and chana Rs 4,300 crore. Trading in rubber and potato futures has been minimal.

“Of late, we have been trying to promote futures in chana in a big way and this comes as a shock,” said an official of a national exchange.

The move to suspend futures in these commodities has caught most of those in the trade by surprise since except rubber, the rest have been showing a declining trend. Rubber futures have been on the rise during the last couple of weeks but its movement is linked to crude oil prices, currently hovering at $123.

Spot rubber prices on Wednesday hit a record Rs 120 a kg in Kottayam but the ban had an immediate impact, bringing down the price by Rs 4 a kg.

Again, soyabean oil prices have been moving in tandem with the rates on the Chicago Board of Trade. Also, the prices have come off their highs witnessed early last month from over Rs 705 for 10 kg to Rs 550 currently. Chana prices have slid currently to Rs 2,525 a quintal from over Rs 2,725 witnessed last month, while potato rates are down Rs 150 a quintal from Rs 700 at the beginning of the year.

“Action on soyabean oil futures was expected since the Abhijit Sen panel called for some action on it as well as sugar. But the Centre would have acted against potato due to pressure from West Bengal and Uttar Pradesh Governments since the prices had crashed. However, the futures were reflecting a crash and the Centre should have taken a cue from it,” he said.

FMC member Mr Rajiv Agrawal said all the open positions in the four commodities would be settled at the closing price on Wednesday. He said: “The suspension does not mean that futures trading is contributing to rise in inflation. It has been taken in lieu of abundant caution to address the concerns of the Government.”

The Government’s move comes at a time when the commodity transaction tax is set to be implemented from June 1.

Reacting to the suspension of futures in rubber, the Rubber Board Chairman, Mr Sajen Peter, said: “We did not seek suspension or ban. We wanted only the price movement to be limited to one per cent either way. In fact, we feel futures help the growers in early price discovery,” he said.

Mr Joseph Massey, Managing Director, MCX, said, “Frequent changes in policy measures will drive away investors and hedgers from the market. If there is no policy continuation we will lose investors’ confidence. Corporates definitely do not want to carry the enormous policy risk.”

Mr R. Ramaseshan, Managing Director and CEO, NCDEX, said, “We derive 20 per cent of our total turnover from these banned commodities and they account for 80 per cent of the total agriculture futures trade. It is going to be a difficult task to regain investors’ confidence.”

Mr Kailash Gupta, Managing Director, NMCE, said, “We have 15,000 small rubber growers, tyre manufacturers and exporters trading on our platform. The Government has gone back on its commitment, which is as good as breach of a contract.”

(With inputs from M.R. Subramani, Chennai)