Government also evaluating proposals for sugar exports in a phased manner.
The Forward Markets Commission (FMC), the commodity markets regulator, plans to discuss restoration of futures trade in the sweetener with sugar industry and commodity exchange officials after Diwali.
“We will meet industry and exchange officials after Diwali, and take a final call later,” said Chairman B C Khatua.
FMC is cautiously stepping towards re-introduction of sugar futures. The government suspended futures trading in sugar in May 2009 following prices rising to the unprecedented level of Rs 44 per kg in the spot Mumbai market in February last year.
The suspension was initially for six months and later extended till September 30, 2010. FMC is now free to approve contracts. But, it does not want to take any risk, says an industry official.
Despite no evidence of a clear link between the price rise and the futures trade, various political parties held the latter responsible.
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Industry players said the price rise was the result of huge production deficit in the country, which was set to be covered by the nearly nine million tonnes carryover stock of the previous year and imports.
Later, the industry body, the Indian Sugar Mills Association (ISMA), raised the production forecast to 19 million tonnes from 15 million tonnes, providing relief to both the government and consumers.
FMC, however, is closely monitoring the progress in the sugar industry this season. It approved, the first contract will come for delivery in December. By then, production and productivity estimates will be available.
Sugarcane production is expected to rise 10 per cent to over 300 million tonnes in the 2010-11 crop year on account of better cane acreage and yield. In the 2009-10 crop year, sugarcane production stood at 274 million tonnes.
The country is set for surplus sugar production this year after two successive years of deficit. The bumper cane output is estimated to yield 25 million tonnes sugar this year as against 19 million tonnes in 2009-10 and a mere 14.7 million tonnes in 2008-09. Experts, however, forecast that production will rise further on anticipated higher yield due to a favourable monsoon.
Exchanges that are eagerly awaiting FMC’s clearance include the National Commodity & Derivatives Exchange (NCDEX), the leading agri commodity exchange in the country, and the recently-launched ACE Derivatives and Commodity Exchange. Sugar was contributing significantly to the turnover of NCDEX before the ban.
Apparently, the government is also evaluating proposals for exports in a phased manner. To begin with, one million tonnes may be allowed to be exported in the first quarter of the next calendar year to help companies take advantage of soaring global prices. ICE raw sugar futures prices are currently near their 29-year high of 30.40 cents a lb hit in February.