Govt set to revamp guargum contract

The government is working on the contract specifications under which narrow commodities such as guargum would be traded on the derivatives exchanges.

The government will be reframing the contract specifications of narrow commodities, and guargum was the perfect example to look at, said Minister of State for Industry and Commerce Jairam Ramesh on the sidelines of the "Mines to Market" seminar organised by the Gems and Jewellery Export Promotion Council on Thursday.

Narrow commodities are those which have low output but are actively traded on the exchanges.

"We met the guargum industry representatives in Rajasthan and they were concerned that the commodity was being cornered by a handful of seasoned traders in a small part of the country. A majority of them are probably neither producers nor consumers of guargum. Therefore, the government has decided to rework the contract specifications so that a narrow commodity such as guargum could not be cornered by a handful of traders," the minister said.

When asked about the possible delisting of guargum from the bourses, the minister pointed out that what is being talked about today is not delisting, but reframing the specifications for futures trading.

The world market for guargum is estimated to be around 250,000 tonnes, with India and Pakistan accounting for 70 per cent. The US consumption is estimated to be around 40,000 tonnes per annum. India's annual exports are estimated at around 115,000 tonnes and the domestic market is worth 25,000 tonnes.

The rising export demand is driving the guargum market. The USA and China are the dominant importers of guargum. Sources said the uptrend in the demand would continue for the next month.

The spot prices of guargum in the Jodhpur and Bikaner markets are hovering at Rs 5,000-5,025 a quintal, which at the beginning of the week were at around Rs 4,925 a quintal.

According to commodity analysts, the demand in April-May will be strong on the export front. It is expected that guargum would trade at the upper level of Rs 5,000-5,100 a quintal. Market sources did not rule out the possibility of the prices touching Rs 5,200 a quintal in the near future. They added that millers had healthy book orders till April.