Traders urge govt to ban rubber futures

Rubber growers and traders urged the government and the Forward Markets Commission (FMC) to stop futures trading in the commodity. Rubber futures had led to volatility in prices, affecting both spot trade and exports, they added.

A delegation of growers and traders had also met the Rubber Board officials recently and expressed concern over the speculative nature of futures trade.

Rubber prices had crossed Rs 100 a kg during the peak season (December-January), leading to hopes that they would hit Rs 120 a kg in the lean season (March-April).

However, a handful of speculators were manipulating futures trade, which had led to the prices dropping to Rs 85 a kg, the delegation alleged.

The surging prices in the peak season had hit rubber-based industries, especially tyremakers, who went in for cheaper imports.

This resulted in the piling up of stocks, which stood at 162,000 tonnes as on March 31, the third largest stockpile in the past four decades, the growers said.

Rubber exports is the previous financial year were dented owing to firm prices. Importers shied away from Indian exporters as they were unable to offer competitive prices in the global market.

The exports in the peak season amounted to a mere 9,060 tonnes of the total exports of 56,488 tonnes in 2006-07.

"The Kabra committee, set up in the late nineties to recommend commodities for futures trading, had not favoured rubber futures. Futures trading in rubber should be stopped with immediate effect," said N Radhakrishnan, president of the Cochin Rubber Merchants Association.

The Kabra committee had pointed out that a commodity should be eligible for trading in the futures market only if it was free from all control, either government or private.

Wherever a commodity was subject to controls, it distorted the market and hence should not be eligible for futures trading, Radhakrishnan said.

Rubber is controlled by the Rubber Board and its inter-state movement is regulated by the board according to the Rubber Act of 1947.

The committee had also recommended that a commodity would be eligible for futures trade only if its production and supply were uncertain.

Rubber output and supply could be correctly estimated and so the commodity should be barred from futures trade, Radhakrishnan added.