Rubber body seeks ban on futures trade

The All India Rubber Industries Association (AIRIA), a forum of the domestic rubber producers and consumers, has demanded an immediate halt to futures trading in the commodity.

"Consumers should participate in a big way for a successful futures trade. This participation is, however, absent in the case of rubber. Apparently, speculators are the only participants and, hence, the futures trade only reflects the fictitious prices, leaving other stakeholders and small players high and dry," said M F Vohra, senior vice-president of AIRIA and chairman of Zenith Industrial Rubber Products.

Rubber is currently traded on the MCX, the NCDEX, the NMCE and the Kochi-based Indian Pepper and Spices Trade Association.

Questioning the need for futures in a commodity that is consumed more than produced within the country, Vohra said the futures only helped in raising the prices, which have more than doubled since the launch of rubber futures in 2002-03. In 2002-03, the average price of natural rubber was quoted at Rs 54 a kg, which surged to Rs 125 a kg last year and is now averaging at Rs 92 a kg against an output cost of Rs 32 a kg.

When planters were getting a fair price in the physical market, what was the need for futures, which only benefit speculators and big businessmen. In the futures market, the prices went up if the demand was created artificially by big players, while they dwindled if they imported around 20,000 tonnes from Malaysia and Indonesia, said Vohra.

Malaysian and the Indonesian exporters have benefited a lot from this price speculation, he added. On cheaper rubber prices compared with the international tags, Vohra conceded the poor quality of the domestic products and emphasised the need to improve it. Employing around 1 million people, the domestic rubber industry consists of 5,000 small-scale players, 130 medium and 32 large industrial houses, producing around 860,000 tonnes a year. The country consumes about 1.1 million tonnes of natural as well as synthetic rubber annually.

The global consumption of natural rubber is hardly 30 per cent, with the synthetic rubber consumption taking up the remaining, larger share.