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Ban on futures trade in sugar

New Delhi, May 26: The Forward Markets Commission has suspended futures trade in sugar till the end of this year to arrest prices, which have been on the rise because of a fall in cane production.

“The FMC has suspended launch of new sugar contracts till December 31. Traders cannot take new positions and only the existing contracts will be allowed to be squared off on expiry,” said Anupam Mishra, a director of the FMC.

Officials said the step was taken in view of the demand-supply situation and the likely impact of the sweetener on inflation.

Sugar prices in the retail market have risen sharply over the last two months and are ruling at Rs 22-30 a kg in key cities of the country. The prices were in the range of Rs 18-23 on October 1 when the 2008-09 sugar season began.

The decision to suspend sugar futures contract comes days after the government revoked a ban on futures trading in wheat.

However, commodity analyst Anand James of Geojit COMtrade said, “This decision in isolation may not arrest sugar prices, which had peaked in April and were now on a downward trend.”

Sugar prices (NCDEX June 19 contract) closed at Rs 2,305 per quintal, lower than last weekend’s close of Rs 2,330 per quintal.

James said the import of raw and white sugar would bridge the gap between the rising domestic demand and the fall in cane production.

The suspension was anticipated as there were only six contracts on the NCDEX, with the last contract expiring on November 20.

Union agriculture minister Sharad Pawar had expressed concern over high sugar prices and said a meeting would be held among all stakeholders to address the issue. He, however, ruled out the import of white or refined sugar.

The new government is expected to allow the State Trading Corporation and the MMTC to continue with duty-free import of white sugar till October.

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