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Wednesday, Jan 05, 2005

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NCDEX hikes margin on sugar futures to 8.25% — To curb further increase in prices

Harish Damodaran

Mr Sharad Pawar

New Delhi , Jan. 4

WITH sugar prices hitting the roof over the last one month, the National Commodity & Derivatives Exchange Ltd (NCDEX) has decided to enhance the margin on open positions in all sugar futures contracts from 6.8 per cent to 8.25 per cent.

The higher margins, to be deposited by the members with the exchange, will be effective from Wednesday.

The move came on a day when the Union Minister for Consumer Affairs, Food and Public Distribution, Mr Sharad Pawar, convened an emergency meeting here to discuss ways to curb what is being seen as excessive speculation in the commodity.

The Government, it is learnt, does not want to take any chances of sugar prices "doing an onion", particularly in the context of the forthcoming elections to crucial State Assemblies.

At the meeting, it was also decided that, if the need arises, the Forward Markets Commission would ask the exchange authorities to levy additional margins.

The other major step that was apparently discussed was to release an additional free sale quota of four lakh tonnes (lt) for the current January-March quarter.

This includes an extra two lt for January and one lt each for the subsequent two months.

Earlier, the Government had released a total free sale quota of 34 lt for the current quarter, which is the total quantity of sugar that mills are allowed to sell in the open market.

This was way below the 39 lt that was released for October-December 2004 and the 34.05 lt for the January-March 2004 quarter.

Wholesale sugar prices have spiralled by more than Rs 3 per kg over the last month alone, with retail prices already crossing the psychological Rs 20 per kg mark.

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