MCX, NCDEX to hike margin in mentha oil futures to curb prices

In order to curb prices of mentha oil futures, commodity bourses MCX and NCDEX have decided to hike its margin money - the deposit traders are required to maintain with the bourse - to 33-40% from tomorrow.

Currently, MCX has made it mandatory for mentha oil traders to maintain a deposit (margin) worth at least 15% of the value of futures contracts sought to be traded. NCDEX has fixed the margin at 7.62%.

In separate circulars, the two exchanges said that it has decided to revise the margin money in mentha oil contracts upward with effect from April 13 following the direction of the commodity markets regulator FMC. 

After the hike, the total margin money at MCX would stand at 40%, especially for trading in the April contracts of mentha oil. For other contracts, it would be 25%.

Similarly margins in mentha oil at NCDEX, where volumes in the commodity are not significant, would increase to 33% for April contracts and 17.62% for other contracts in mentha oil. 

"Prices of mentha oil futures have risen by 30% in last one month. Margins are imposed to check speculative trade and curb price rise," Kochi-based commodity brokerage firm JRG Wealth Vice-President and Research Head Harish Galipelli said. 

Mentha oil futures prices have risen to Rs 1,300 per kg now from Rs 1,000 per kg in one month. Prices have risen rather consistently from Rs 550 per kg in February 2010 to Rs 1,300 per kg now, he noted.

Recently, the regulator FMC had also conducted an enquiry to determine whether speculative trade was contributing to the sudden spike in the prices of menthal oil, sources said. 

According to trade estimates, menthal oil production is expected to increase to 38,000 tonne this year, as against 28,000 tonne in FY10 season. Mentha is a rabi crop.