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FMC may re-introduce futures trading in natural rubber

KOCHI: The nearly million-strong rubber farmers in the country are looking to market regulator Forward Markets Commission (FMC) which is likely to re-introduce futures trading in natural rubber.

Despite great farm gate price enjoyed by rubber farmers, particularly in Kerala, futures trading in natural rubber has divided the rubber community and the debate over this has grown louder. FMC banned futures in natural rubber along with three other commodities in May this year for four months. The ban was later extended up to November as a measure to combat inflation.

There is no legal barrier to futures trading in natural rubber but some technicalities need to be sorted out. Reports indicate that Multi Commodity Exchange of India Limited (MCEX), National Multi Commodity Exchange of India Limited (NMCE) and National Commodity and Derivatives Exchange Limited (NCDEX) are awaiting FMC nod to resume futures trading in natural rubber.

General Secretary of Indian Rubber Dealers’ Federation Jose Mamparambil welcomed the imminent re-introduction of futures trading but called for more transparency in the market. Swaranjit Singh, Convenor of Automotive Tyre Manufacturers’ Association (ATMA) Purchase Group and Vice-President, Materials, JK Tyre & Industries, said in an e-mail message that the Association welcomed the move as “this was a step towards market maturity.” Rajiv Budhraja, Director General of ATMA suggested that the intraday variation should be limited to two per cent, i.e., one plus one per cent. Chairman of Rubber Board Sajen Peter is learnt to have written to the Union Commerce Ministry seeking the re-introduction of futures trading when the ban period ends.

N. Radhakrishnan of The Cochin Rubber Merchants’ Association said that after the suspension of futures trading in natural rubber in May rubber prices went up from Rs.109 a kg to Rs.140 a kg gradually, he said in a statement. He also claimed that the recent crash in rubber price had nothing to do with the domestic market situation. Futures trading in natural rubber is being supported by a few people in the sector but it will not solve the problems of the sector, he felt. He also blamed futures in natural rubber for difficulties to the general trade and industry.

Mr. Radhakrishnan said that the recent fall in the price of natural rubber caused problems to the million-strong rubber farmers in the country and that the Government should take steps to mitigate their problems.

Meanwhile, the Indian Rubber Dealers’ Federation has repeated its demand that the FMC introduce measures to end volatility in rubber futures.

A memorandum sent to the Commission suggested setting a limit to the fluctuations so that speculators did not make use of the futures facility to manipulate the market. The Federation is hopeful that FMC will consider its plea this time.

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