The Hindu : Business : Ban on rubber futures trade opposed

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Thursday, May 15, 2008
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Ban on rubber futures trade opposed

Staff Reporter

Stakeholders say it is detrimental to the economy

— Photo: K. K. Mustafah

GROWING DEMAND: A rubber tapping worker is carrying latex in a plantation near Kochi. Growing demand in the domestic market and indigenous needs of rubber in the industrial sector created the current rush for rubber. .

KOCHI: Various stakeholders in the rubber futures trade on Wednesday opposed the temporary ban imposed on the trade. At a meeting organised by the National Multi-Commodity Exchange of India Ltd., broking firms, traders and farmers expressed the apprehension that the ban would affect their deals adversely.

Kailash Gupta, Managing Director of NMCE, said the futures trade had helped price recovery in rubber. The government action was intended as a measure to rein in inflation, but suspension of futures trade was detrimental to the economy, a fact that had been acknowledged in the West. An appreciative ‘Kerala model’ in rubber futures had been taking shape when it met with an abrupt end due to the ban. Unless extended, the ban would come to a close in September and the trade could be resumed then. Anil Misra, CEO of NMCE, said the very concept of closing the trade was wrong. The government appeared to have acted under pressure to take some steps to check inflation, but the action amounted to exerting control without addressing the real issue. Prices are not decided by the regulator, Forward Markets Commission or the commodity exchanges.

Synthetic rubber prices had gone up because of the rise in petroleum prices. Consequently, synthetic rubber was being substituted by natural rubber. The increase in demand of natural rubber has resulted in its price rise. The phenomenon was not because of futures trade, he said.

Joseph, an official of a rubber-based company, said the objective of the ban had not been achieved as the prices of rubber continued to rise. He said compensation should be paid to those who could not complete the transaction because of the ban.

Another official representing a commodity broking firm said most of those who were hedging their position were affected. The ban should not recur, he said. One of the participants threatened to take the issue to court.

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