Three months on, futures ban fails to tame prices

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Three months after the suspension of futures trading in four commodities by the Centre, prices of three of them have risen sharply; while one commodity witnessed decline in prices.

The government imposed suspension of futures trading of potato, rubber, refined soya oil and chana in May for controlling the prices. The data collected from spot markets reveal that barring potato, prices of all the three commodities have risen sharply.

Potato—the only commodity, whose prices have declined after futures were suspended for four months, was quoted at around Rs 3.50 a kg in the wholesale spot markets for the Agra variety, on the date of suspension the price was around Rs 4.72 a kg, a drop of almost 26%. However, in case of the other three banned commodities—rubber, refined soya oil and chana, prices have gone up. Out of these commodities, the price of rubber have increased sharply, while for the rest of the commodities, the rise in prices have been moderate.

Rubber prices have risen by around 13.99% since May to around Rs 13,633 a quintal. Refined soya oil has risen by around 6.66% and is currently quoted at Rs 615.85 a 10 kg. The price of Chana has gone up from Rs 2,398 a quintal on May 5, to around Rs 2,565 a quintal in August, a rise of 6.5% a kg in July—a rise of almost 2%.

Even for the four commodities banned last year, the story is similar. Except for wheat, price of the other three commodities have also risen since the imposition of suspension.

“We have been consistently maintaining that the swing in prices are due to fundamental issues relating to demand and supply, the futures trading helps the farmers in price recovery,” an official with the Multi Commodity Exchange (MCX) said.

Prices of wheat has risen marginally to around Rs 10.75 a kg from around Rs 10.40 kg a year-back. Experts said prices of wheat have risen only marginally in open markets mainly due to bumper production and record procurement by state-agencies.

The government may not extend the ban on the futures trading of four agricultural commodities beyond September. For controlling climbing inflation, the government had suspended futures trading in soya oil, potato, rubber and chickpea for a duration of four months in May.

“There is no plan to extend the ban on futures trading of agricultural commodities,” BC Khatua, chairman, Forward Markets Commission had said. He said there were no linkages between the commodity prices and ban on futures trading.