Kotak-anchored Ace Derivatives & Commodity Exchange Ltd plans to rejig its sugar contract and major delivery base from Kolhapur in Maharashtra to Delhi, to capture the mass consumer market in the north.
Ace originally launched Delhi-based sugar contracts last December. “The exchange is waiting for deregulation in sugar to be announced or at least the stock limit to be waived to attract large corporate clients. Owing to the limit, traders’ participation on the commodity exchange is limited,” said Dilip Bhatia, CEO.
Sugar mills in Maharasthra are largely controlled by cooperatives that are regularly monitored by the government. Last year, the Centre announced a fair and remunerative price, at Rs 139.12 a quintal, substantially lower than the state advised price in UP at Rs 205 a qtl.
The cane price is nearly 90 per cent of the cost of sugar production. The cost of production in the north averages at Rs 2,900 per qtl, as compared to Rs 2,700 per qtl in Maharashtra. This price difference also reflects on the exchange. Since the cost of production is much lower in Maharashtra, the commodity markets regulator, the Forward Markets Commission, has approved sugar contracts on all exchanges with a major delivery centre in Kolhapur. After a 17-month ban, sugar future contracts were relaunched in December last year. Ace has added Delhi as an additional delivery centre. But traders are not interested in taking delivery at a Rs 200 per qtl premium (due to the price differential from the main delivery centre) over Kolhapur.