Private sugar mills in Maharashtra have expressed concern over the state government’s decision to investigate alleged speculation in sugar trading on commodity futures in the country. The millers feel that such a move will have a negative impact on the industry and farmers.
In a representation made to Maharashtra chief minister Devendra Fadnavis, Western India Sugar Mills Association (WISMA) vice-president Rohit Pawar said that the association is not advocating commodity futures market, but a long-term view on the issue through a detailed study would be helpful.
Pawar is the CEO of Baramati Agro and belongs to the family of Nationalist Congress Party (NCP) leader Sharad Pawar. The Maharashtra government, along with some other state governments, is using the NCDEX platform for Public Distribution System (PDS) sugar purchase, he added.
The CM at a recent event in Pune had expressed concern over speculative activity in commodity markets and volatility in sugar prices caused by this trading. He had said that there is a need to find out if there are some special forces at work. “Lakhs of tonnes of sugar are being traded on NCDEX while actual delivery is just 25%. If such deals are happening it is leading to volatility in prices and such forces need to be curbed,” he had said.
According to Pawar, news regarding speculative trading investigation had impacted the sentiments and sugar prices have come down from R30 per kg to R28.50-R29 per kg.
On Tuesday, farmer organisation Swabhimani Shetkari Sanghatana (SSS) had stormed into a government warehouse in Baramati, Sharad Pawar’s hometown, alleging that sugar belonging to a large trade house in Mumbai was stocked here for the last three months.
Rohit Pawar pointed out that at present there are no stock holding limits in India and the ‘news’ of this nature could hurt both the fundamentals and sentiments of the market.
“ Such moves lead to panic in the trading community and both institutional buyers and traders begin hesitating in picking up stocks for the fear of the investigation, thus impacting the trading pipeline. Such stocks are normally a part of trade practice,” he said.
“ We are happy that government has supported the industry by giving a soft loan but the cost of production had gone up this year because of the drought conditions and the picture looks bleak for the next season as well. The cost of production has gone up by R3-4 per kg and with prices coming down again, it will impact both millers and farmers in the long run,” he said.
“The commodity futures market in India is very small in volume turnover as compared to markets in countries such as China, the US and the UK. Futures trading has emerged as a viable option for providing a greater degree of assurance on the price front. Commodities such as soybean, maize can be hedged on this platform by farmers. Also processed agriculture commodities like sugar can be hedged by the industry which in turn will help farmers. Using the futures platform, farmers can store thier produce in the exchange designated warehouses till the time their produce fetches reasonable returns,” Pawar said.
Recently Raju Shetti, an MP and farmer leader, had demanded a probe in commodity future trading in agricultural commodities. Shetti had written to the Union finance minister, Sebi and other government authorities alleging a big scam where sugar prices were systematically made to fall by handful traders. As a result, prices had fallen from R2,800 to R1,850 per quintal in physical market. He had demanded thorough investigations in artificial price rigging.