The Hindu Business Line : Why was rubber targeted

Chennai, May 8 The Centre’s move to suspend rubber futures follows a concerted effort on the part of traders, mainly based in Kochi, and the tyre manufacturers.

Their justification to discontinue the futures was that there were no fundamental reasons for the prices to rise. “Only a few speculators were managing the futures. Farmers, traders and industry were negligible,” said Mr N. Radhakrishnan of the Cochin Rubber Merchants’ Association.

Why did the merchants’ association, in particular, press for a ban? “Because it was threatening our very survival,” he said.

Rubber merchants trade rubber on a thin margin of 0.5 per cent. “If I sell 10 tonnes of rubber today, I will be happy to earn Rs 5,000,” he said.

“Our margin is thin because growers get 92-93 per cent of the terminal market price. But in the futures, initially intra-day limit on rise or fall in prices was fixed at nine per cent,” he said.

If RSS-4 grade rubber opened at Rs 100, it could decline to Rs 91 or rise to Rs 109. “In such a situation, we can’t give a quote to someone outside Kerala,” Mr Radhakrishnan said.

Nearly 80 per cent of the rubber grown in Kerala is sold outside the State. The margin, on protests from the traders, was cut to six per cent, then to four per cent and finally to three per cent.

Still, it led to nearly 7,000 traders of the 8,000 in Kochi incurring losses. “Over 90 per cent of the speculators too got hit,” said Mr Radhakrishnan.

“The rise in futures even choked supply for us,” said Mr Rajiv Budhiraja, Director-General of the Automotive Tyre Manufacturers’ Association.

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