The Hindu Business Line : Govt release control stalls sugar futures

"We are ready to launch futures trading. But our plans have been put on hold in view of the Government reverting to the monthly free sale quota," Mr Himanshu Shah, Vice-President, Corporate Affairs, EsugarIndia, told Business Line.

EsugarIndia, which had planned to go online with its futures trade from last month, is among the three parties given permission by the Government to hold futures trade in sugar. E-Commodities Limited, Mumbai and NCS Infotech Ltd, Hyderabad are the other two parties.

Esugarindia would be the country's first demutualised commodity exchange, run exclusively by professionals and not by promoters or traders/members of the exchange. Even the clearing operations will be handled by professionals, according to officials.

While United India Insurance will cover the online transit insurance, HDFC Bank will offer payment facilities.

Following the acceptance of the B.B. Mahajan Commission report, the Food Ministry had resorted to announcing sugar free sale quota on quarterly basis from January this year. In view of a sharp fall in prices before the mechanism could come into operation, the Government made a slight modification to the quota by splitting into two halves of 45 days. As the prices continued to fall and touched a six-year low, the Government reverted to the monthly release mechanism from July. The free sale quota is the amount of sugar fixed by the Government for sale by the mills.

According to trade sources, the Government's plan to decontrol the sector in phases is to gather further momentum from October. "The free sale quota should be announced on a bi-annual basis from October," they said.

Mr Shah said EsugarIndia had taken up the issue with the Food Ministry and written a letter. "We have also taken up the issue with the Forward Markets Commission (FMC) and it has represented our case strongly," he said. FMC supervises the functioning of all commodities exchanges in the country.

When contacted, the FMC Chairman, Mr A.K. Bhat, said the commission had forwarded Esugarindia's letter to the Food Ministry.

"The Government will have to get out of the control mechanism. What is the guarantee that tomorrow, someone will not go to the ministry and not manipulate the release?" trade sources wondered.

"Based on the Cabinet's decision, sugar futures were allowed. Now, the Government seems to have backtracked. It will not be possible for traders to hold positions when the monthly release mechanism is in place," Mr Shah said.

However, the Indian Sugar Mills Association, the body of private sugar mills, has been categorical that both futures and the release mechanism can co-exist. The mechanism is seen as an instrument of assured payment to the growers.

"We hope the Government will soon take a decision," Mr Shah added.

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