The National Commodity and Derivatives Exchange (Ncdex) is in a dilemma following the suspension of jute futures, said chief business officer Narendra Gupta. |
The Ncdex December jute contract was set to expire on Tuesday this week but the jute futures, on Mumbai-based Ncdex and the Ahmedabad-based National Multi-Commodity Exchange of India (NMCE), were suspended last Thursday. |
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"We await instructions from the regulator (Forward Markets Commission) on how to settle the current as well as the next two contracts. The big issue at the moment is the current contract as there is a confusion regarding what price should we settle and at what date we take as settlement date. We expect to receive FMC instructions later tonight or early tomorrow," Gupta said. |
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When contacted, FMC chairman S. Sundareshan said, "We will give the necessary instructions to the Ncdex. The whole matter is not a big issue and will be sorted out" |
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NMCE, however, is not facing any problems with the current contract as it settlement date is 15th of every month and the suspension of contracts were just around that time, said NMCE's managing director Kailash Gupta. |
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He, however, remains worried about how the January and February futures will be settled, which have been suspended mid-way and hold the risk of open interest positions. |
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"We will wait for how Ncdex manages the situation as we have time," said NMCE's Gupta. |
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The exchanges have approached FMC and the Ministry of Consumer Affairs (which is associated with commodity futures) on the suspension on jute futures. "The Department of Consumer Affairs has written to the Union Ministry of Textiles (which governs Jute Commission) on the matter. We expect the whole matter will be resolved soon," said NCDEX's Gupta. |
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Sundareshan, however, refused to comment on the letter sent to the textile ministry. Jute futures were suspended following Jute Commissioner's recent order of fixing prices for various grades of raw jute, under the Jute Textiles Control Order, 2000, in line with the industry's long-term demand. |
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As per the notification, no dealer or trader would sell or purchase raw jute at a price exceeding the prices announced. |
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The fixed prices, like that of raw jute at Rs 1,468 per 100 kg for the south Bengal (ex-Kolkata) variety, are lower than those reigning on the futures market, about Rs 1,530-60. |
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Interestingly, there is no hue and cry coming from trade even as futures has been suspended. On the other hand, physical trade is continue, unofficially, and spot prices trail high, about Rs 1,560 per 100 kilograms level. |
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Futures market supporters feel that putting a price cap on a commodity will hurt price discovery process. |
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Jute industry feels that while prices of jute products, at large, are seen at an all-time high, those of jute remain low and this is hurting the sector's growth. |
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The reason behind this was hoarding of crop by a group of stockists and traders, looking for benefits on the futures by creating an artificial demand-supply mismatch. |
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