FMC may allow sugar futures today

Regulator not to allow contracts for seasonal commodities to stretch for too long.

The Forward Markets Commission (FMC), the commodity derivatives market regulator, is likely to allow re-launch of sugar futures tomorrow.

“We have already taken a final decision in this regard,which will be officially announced on Thursday,” said an FMC official,wishing to be identified. He said three-month contracts would be launched initially.

The government had banned sugar futures in May last year to control rising prices. Last week, the regulator had convened a meeting with various stakeholders to take a final decision. According to sources, the domestic sugar industry is very enthusiastic to see trading of the sweetener on the derivatives exchanges. Nearly two months earlier, Union agriculture minister Sharad Pawar had asked the FMC to take stock after studying various options and decide.

Last week, FMC chairman B C Khatua had hinted sugar futures would be allowed, possibly this week, with the first contract available for settlement in January.

But FMC is categorical on not allowing contracts to stretch too many months in seasonal commodities such as sugar. Anything over four to five months’ contract in such seasonal commodities opens room for entrepreneurs to play with malafide intent, it believes. Hence, those limited period contracts which attract fair liquidity will be allowed.

“Domestic prices are much lower than overseas prices. Allowing sugar futures will not only bring us a level playing field but also provide an opportunity for domestic traders for a fair price discovery,” said B J Maheshwari, Director of Dwarikesh Sugar Industries.

Spot sugar prices in the Vashi Agricultural Produce Market Committee closed range-bound today, with M-30 and S-30 traded between Rs 3,100-3,250 and Rs 3,075-3,225 a quintal, respectively. For mill delivery, however, M-30 and S-30 sugar was traded between Rs 2,850-3,050 and Rs 2,840-3,040 a qunital, respectively.