Rubber Board says no to futures ban

The 8,000-plus rubber dealers of Kerala are a divided lot these days. In the recent annual general meeting (AGM) of the Indian Rubber Dealers Federation (IRDF), the apex federation of 20 dealers' associations of Kerala and Tamil Nadu, the dealers were caught in a bind over the issue of futures trading in natural rubber (NR).

In spite of a section of traders demanding a ban on futures trading, the Rubber Board said that futures trading should not be banned.

The board said trading should be regulated and transparent since a high range of volatility troubled growers and a chunk of small traders.

Rubber Board Chairman Sajan Peter said all the stakeholders had to accept futures trading and banning it is difficult. The board even wrote to the ministry of consumer affairs and market regulator Forward Markets Commission (FMC) to make the board's registration compulsory for trading in futures market.

But the government directed the Rubber Board and the FMC not to make registration compulsory in futures trading. It also recommended to lessen the daily fluctuation limit in prices to 2 per cent, which is 4 per cent currently and has sometimes gone as high as 9 per cent. Some traders felt there would be parallel split in various associations over the issue as small and medium traders are in majority.

N Radhakrishnan, president, Cochin Rubber Merchants Association, one of the oldest associations of the state, said that futures trading was a bane to both growers and traders and should be banned. The high range of volatility in prices, which is well-orchestrated by a group of players, is destroying the market.

The split over the issue is having an interesting geographic dimension also. Traders from Pala, Kanjirappally and Kothamangalam areas in the state are strongly advocating futures trading. They said the high range of prices during the last 12-15 months is mainly because of contract trading.

Interestingly, in the Pala area of Kottayam district, rubber futures trading has been active for the last 25-30 years, widely known as 'Rubber Satta', though it is un-official. A major chunk of traders from Kochi, Pathanamthitta, Kollam and Thiruvananthapuram districts are against contract trading. They argued that according to the Indian Rubber Act of 1948, natural rubber is a regulated commodity and conduct of futures trading is against the Act.

Radhakrishnan said the Kabra Committee report on futures trading is silent on trading in rubber since the production and consumption of the product is almost at par in India.

The committee also recommended not to conduct contract trading in such commodities. IRDF President George Vally said that during the AGM, the dealers voted for futures trading.