PAC sees no unusual price change, rejects call for ban on turmeric futures

Finds that even though prices vary between different grades, overall price trend remains more or less same, making the availability of reference price crucial

The Product Advisory Committee (PAC) on turmeric has rejected calls for banning futures trade in the commodity, claiming that it has not found any unusual movement in its price.

Reacting to the demand made in some quarters to delist turmeric futures from the exchanges due to unusual price movements, PAC found that even though prices vary between different qualities and grades, the overall price trend remains more or less same, making the availability of a reference price very important.

The PAC for any product is constituted under a mandate framed by Sebi and includes representatives from across the commodity value chain, such as traders, exporters, processors and FPOs working in the field.

The PAC on turmeric had met a few days back to review the product and deliberate on the concerns raised by some traders over the sharp and unusual movement in price of the commodity.

Turmeric futures is one of the key trades on the National Commodities and Derivatives Exchange of India (NCDEX).

As of August 30, out of the total traded value of Rs 593 crore in the exchange, turmeric's share was Rs 41.64 crore.

"We have seen healthy deposits happening in Basmat (a place in Maharashtra that is also a big physical market for turmeric) in the past with existing quality specifications, which are in line with FSSAI and Agmarknet benchmarks. The quality is tested in NABL accredited labs," Punam Chand Gupta, Chairman, Turmeric PAC said.

The PAC added that derivatives are well accepted tools globally and are being used efficiently for price discovery and price risk management.

“The amount of transparency these tools bring to the system is unmatched by any other instrument. Turmeric futures contracts were also introduced to protect value chain participants from price risk. The very purpose of the contracts is to show the prices in the future so that stakeholders can make pricing decisions accordingly,” PAC said.

NCDEX turmeric futures contracts are also standardised for quantity and quality, it added.

Elaborating further on the reasons for the fluctuation in turmeric prices seen during the past few months, PAC said the price being discovered on NCDEX is for a single standard grade, while the quality of crop coming the market for sale varies in quality.

The average variation between the minimum and maximum prices is about 30 per cent, but can go up to 80 per cent at times.

“This is mainly because of quality variation in the crop. But even though the prices vary between different qualities and grades, the overall trend in the prices remains more or less the same which is why the availability of reference price becomes very important,” the PAC said.

It said a trend analysis done by it shows that the maximum and minimum prices of turmeric in the Basmat market moved in tandem with the futures prices during the past two years.

Calling upon the traders and others to approach the exchanges to get more information on the functioning of the futures market, the PAC said that apart from getting a ready price reference there has been drastic growth in participation of the farming community in the futures market in the last few years.