FMC restricts futures trading in potato to check prices

Decision taken in the backdrop of rising prices of potato and other essential commodities

Commodity markets regulator FMC has curbed futures trading in potato contracts for July, August and September in order to check prices by disallowing fresh positions and hiking deposit amount on buyers.

The Forward Markets Commission (FMC) has taken this decision in the backdrop of rising prices of potato and other essential commodities, which could be aggravated by the likelihood of a sub-normal monsoon.

Currently, potato trading is active only on the commodity bourse MCX, while it is negligible on NCDEX.

Following FMC's directive, MCX in a circular said it has disallowed fresh positions in July, August and September contracts of potato with effect from June 18.

To restrict buyers, MCX has also hiked the margin money from 5% to 30% of the value of the commodity.

"Further, 25% special margin (cash) shall be imposed on long (buy) side for all contracts of potato with effect from June 23," the exchange circular said.

A trader is allowed to participate in futures only after he deposits this margin amount with the exchange.

Analysts said that FMC has taken a precautionary measure even as there is no co-relation between price rise in retail market and futures market.

Potato prices in June contract trading at MCX are ruling at Rs 1,270 per quintal, while it stood at Rs 945 per quintal in January. Trading volumes in June contract stood at 3.2 lakh tonnes last month.

On June 17, the government had announced a slew of measures to check rising prices of essential commodities. It slapped a minimum export price (MEP) of USD 300 per tonne on onion and will soon fix MEP for potato to curb exports.

The government had also decided to release additional 50 lakh tonnes of rice in the open market besides asking state governments to initiate crackdown on hoarders and black-marketeers.

Both wholesale and retail prices of potato are on rise even as the domestic production is estimated to be higher by 2.3% at 46.4 million tonnes in 2013-14.