The Forward Markets Commission (FMC), the commodity markets regulator, may allow re-launch of sugar futures tomorrow with the first revived contract to be made available for trading from November 1.
The Ministry of Agriculture had put the ball in FMC’s court. “We are examining various proposals sent to us by the commodity exchanges. We have not discussed the matter even internally, though,” said a senior FMC official. The official, however, confirmed that the agriculture ministry had authorised FMC to take the final decision.
The regulator had suspended sugar futures contracts in May last year in anticipation of high speculation on derivatives platforms, as the country was short of sugar in the previous two years. The year 2008-09 saw a total production of 14.7 million tonnes, which is expected to rise to 18.5 million tonnes this year, against the total consumption of 23 million tonnes.
The ban was imposed in May last year for an initial period of seven months ending December 2009. But, it was extended until September 30. As there is no further extension, the ban will automatically expire on October 1.
While FMC Chairman B C Khatua was not in favour of extending the ban anymore, Agriculture Minister Sharad Pawar recently hinted that the final call would be taken after assessing the sugarcane output 2010-11 for the crushing season (October-September). Prices of the sweetener have fallen nearly 33 per cent fromRs 45 a kg early this year to Rs 30 a kg now.
Last month, the regulator said the ban would be reviewed only after watching the progress of the June-September monsoon rain, which is vital for the cane crop.
Meanwhile, all commodity exchanges that were offering futures contract in sugar before the ban, are warming up for re-launch.
“Contracts specifications are ready. After getting it’s clear signal from the regulator, we will apply for contracts approval. We think it’s a matter of two-three days unless the regulator explores ambiguities in the contract specification and seeks clarifications on them,” an MCX official said.
Hopefully, the first contract will be available for traders since November 1. Sugar was one of the key commodities being traded on NCDEX in the pre-ban era.
“NCDEX is also ready with contracts. We are waiting for the regulator to allow us trade in the sweetener. The moment we get regulatory approval, we will start offering trade in sugar,” said Vijay Kumar, chief business officer of NCDEX.
The ministry of food and pubic distribution, however, had recommended to the FMC to extend the ban on trading of sugar futures till the festive season is over. The ministry had sent recommendations to the regulator to prevent any scope of speculation in the sugar prices at a time when prices of all commodities on an average are ruling high.
