NCDEX slashes transaction fee in sugar futures

Aims to attract traders after govt removes stockholding limit

The agri-centric commodity futures trading platform, National Commodity and Derivatives Exchange (NCDEX), has reduced transaction charges sharply to attract volumes in sugar contracts following the removal of stockholding limit on Tuesday.

Effective December 21, NCDEX would be charging Rs 0.10 for every Rs 1,00,000 of sugar turnover. Earlier, it was Rs 4. Apart from that, the exchange has exempted risk management fee of Rs 4 for every Rs 1,00,000 of trade in sugar contracts. So, NCDEX would charge only Rs 0.10 from Rs 8 earlier for every Rs 1,00,000 of trade. The sharp decline in transaction charges is expected to drive traders and stockists towards futures trade, given that around 1.5 million tonnes of fresh purchases are expected. The government removed stockholding limit of 1,000 tonnes on traders in the Northeast and of 500 tonnes on traders across the rest of the country. “Removal of stock limits enables the move to a more market-based price discovery process for sugar. The NCDEX sugar contract has traditionally served the sugar industry well and we look forward to rebuilding participation to facilitate an orderly price discovery process,” said Samir Shah, MD & CEO, NCDEX.

Removal of the stock limit will ensure additional buying, supplemented by robust production and smooth supplies. This will lead to better market sentiments. Large co-operatives and millers will now be able to fetch sizeable stocks from the market, thereby activating the impending purchase cycle that had witnessed a dry spell in the past three months

This decision of the government also empowers sugar farmers to take production and post-harvest marketing decisions by looking at the futures price.

Approximately, 50 million sugarcane farmers and approximately 0.5 million sugar mill workers are directly dependent on the sector for their livelihood.

During sugar season 2017-18, crushing operations in all major sugar producing states had started smoothly. Total sugar production was estimated to be around 24.9 million tonnes by the end of the season, against estimated consumption requirement of about 25 million tonnes.

However, with the carryover stock, the availability of sugar was sufficient to meet estimated domestic requirement. As such, there will be smooth availability of sugar and the prices in the domestic market are expected to remain stable at reasonable levels.  

The NCDEX had recorded a thin volume in sugar futures with around 30 tonnes as open interest for all running contracts as of December 20, 2017.