The Forward Markets Commission (FMC) has commenced investigations into the alleged manipulation in prices of guargum and guarseed on the National Commodity & Derivatives Exchange (NCDEX).
The market regulator has sent investigation teams to major trading centres for the commodity — Rajasthan, Delhi, Madhya Pradesh and Uttar Pradesh — to check the possibility of price rigging.
NCDEX officials have joined these teams and the exchange is playing its part in the probe, as a third of its volumes comes from guargum and guarseed trade.
“We have sent teams to leading trading centres across the country to check traders’ accounts. The teams are selected in coordination with exchange officials,” said FMC Chairman Ramesh Abhishek.
“Earlier, FMC had asked the exchange to look into the complaints. Now, FMC has sent its own teams with exchange officials. The major objective of the team is to check the accounts of top clients and discover wrongdoings,” he added.
There has been a phenomenal rise in the prices of guarseed and gum. From Rs 2,800 a quintal in April this year, the spot price of guarseed has jumped 146 per cent to Rs 6,900 a quintal. Similarly, guargum price has shot up by 177 per cent to Rs 23,000 a quintal, from Rs 8,300 a quintal in April.
Also Read
Several industry stakeholders have complained to the commodity derivatives market regulator that a handful of traders, including a couple of large companies, are cornering guargum for the last few months.
A similar situation had arisen in 2005 when the share of the two commodities had shot up even higher — at 40-50 per cent of NCDEX’s total turnover. The regulator had penalised the traders involved in line with FC(R)A guidelines. After that, a huge special margin was levied to curb the price volatility.
“While a number of small traders had been involved in 2005, this time large companies, including a Delhi-based construction company and Gujarat based multi-crore commodity company, have built large positions in guargum under various names,” said a large Jaipur-based trader.
“While a number of small traders had been involved in 2005, this time large companies, including a Delhi-based construction company and Gujarat based multi-crore commodity company, have built large positions in guargum under various names,” said a large Jaipur-based trader.
Guargum is used as a thickening and binding agent in the food, textile, paper, pharmaceutical and oil industry. Highly refined guargum is used in the food industry as a stabiliser in ice creams (butter scotch ice cream is made from guargum), as a meat binder and a stabiliser for cheeses, instant puddings and whipped cream substitutes. It is used in industrial applications, including cloth and paper manufacture, oil well drilling, explosives, ore flotation, and many other applications.
“We are investigating into the matter,” said Ananda Kumar, chief (corporate services), NCDEX. Of NCDEX’s Rs 60,856-crore turnover during the November 1-15 fortnight, guarseed contributed Rs 15,752 crore, while guargum share was Rs 4,525 crore.
Since India’s share in the global guargum market stands at over 97 per cent, the participants who have been allegedly cornering the commodity, could be doing so to sell it in overseas markets on premium in the long run.
According to the exchange’s research, the current upward pressure on guar complex prices can be attributed to fundamentals of a rising export demand and lower domestic supply. In fact, the growing demand for guargum seems could have led to the pressure on guarseed prices too, as almost 90 per cent of guarseed is used for producing guargum. According to market estimates, guargum exports jumped sharply to 145,000 tonnes in the first quarter of the current financial year from 71,340 tonnes in the same period last year.