Farmers, traders question potato futures ban

"There was no reason for the government to ban futures trading in potato as the crop's harvest is bumper, prices are stable and farmers are battling with the problem of plenty," a former UP MLA and potato-grower in Agra region, Pratap Choudhary said.

As an immediate fallout of the ban on futures trading of potato, industry experts fear the prices of the commodity may crash because of absence of price discovery mechanism.

 

The government yesterday suspended futures trading of potato along with rubber, chana and soya oil for four months.

Potato farmer Rameshwar Dayal of Nithei village, 40 km off Agra, said the ban will create more problems for farmers, who are already battling with a high level of production. He feels there will be no certainty of prices, as "no one will be able to tell us the real price".

"When we knew the MCX price, at least we were able to tell the traders the rates at which they should buy. Now it will be decided at mandis," he said.

MCX is the leading commodity exchange in potato futures where the open interest of Agra variety was 50,000 tonnes and that of Tarkeshwar (West Bengal) 35,000 tonnes. Open interest in futures trading is the total number of outstanding contracts on a day that have not been liquidated.

Industry experts said prices may start declining and ultimately crash in a couple of months. Uttar Pradesh and West Bengal governments have purchased potatoes at Rs 2.50 a kg to help farmers.

"It was because of futures trading that potato prices did not crash as at the exchange platform they were ruling at Rs 4.50 per kg. The prices may now start declining and ultimately crash in a couple of months," said an industry expert.

President of the Potato and Onion Merchant Association at Azadpur, Delhi, Trilok Chand Sharma, however, does not foresee any major impact.

"There will be no impact because most of the people trading in futures market don't actually take delivery of the commodity. They do it for hedging the risk," he said.

On the other hand, cold storage-owners said the ban would affect both farmers and traders. "Potato farmers will have to bear the loss and this will ultimately affect the cold chain owners," Mukesh Singhal, a cold storage owner said.

Potato prices are now ruling at Rs 7-10 per kg at retail markets in many places in the country due to higher production in Uttar Pradesh, Gujarat, West Bengal and Bihar due to non-availability of adequate storage.

Potato production in the country is estimated at 29.3 million tonnes in 2007-08 crop season as compared to 27. million tonnes in the previous year.