The Hindu Business Line : `Sarda's arrest affects raw jute futures'

Agri-Biz & Commodities - Commodity Exchanges
Industry & Economy - Economic Offences
States - West Bengal
`Sarda's arrest affects raw jute futures'

Pratim Ranjan Bose

He controls 9 jute mills in West Bengal

Kolkata , Nov. 20

The arrest of Mr Ghanshyam Sarda, Managing Director of Monozyme India Ltd, over supply of spurious blood testing kits has added to the woes of National Multi Commodity Exchange's (NMCE) raw jute futures.

Mr Sarda reportedly controls nine jute mills in the State and is one of the largest players in the raw jute trade and was arrested in October. Though not a member of NMCE, market sources feel that the jute baron made his presence felt in NMCE trade through his associates. His absence has reportedly led to the market getting abnormally disturbed.

Subjected to several controversies since last year, leading up to temporary withdrawal and fixing of price ceilings by Jute Corporation of India, the trading volume on the re-launched contract has now plummeted to all time low of Rs 10 crore per day which not more than 10 per cent of the off-market trade.

Experiments to bring clarity to spot jute prices by launching one-week contracts had not succeeded either.

Apart from rubber, jute was one of the few liquid commodities on NMCE.

The situation may worsen further as the exchange, to safeguard itself from controversies over spot market price mismatch, had made the contract compulsorily delivery-backed from January onwards.

High storage cost

According to market sources, jute being a bulk commodity, is subjected to very high storage cost of roughly 1.5 per cent per annum as against 0.25 per cent for agri-commodities like chana, guar, guargum, rapeseed and others.

While NMCE is negotiating with warehouses to cut down on storage cost, market sources feel that delivery is unlikely to take off in jute futures.

Market insiders feel that the raw jute cartel controlled by a handful of players were prime factors behind the failure of contracts floated by electronic exchanges. Out of roughly 50 known traders, hardly 10 are most active. Of the active traders, two control lion's share of the market.

Thanks to their limited numbers, these traders are also reportedly using the exchange platform to promote off-market trade.

More Stories on : Commodity Exchanges | Economic Offences | Jute | West Bengal

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