``The August contract expires on August 15. But before that we expect to have the contract guarantee in place and get the FMC approval,'' president, Sanjay Mariwala, of Indian Pepper and Spices Traders' Association (IPSTA), which runs the bourse, told PTI over phone from Kochi.

In order to fulfil the FMC directive, IPSTA had appointed two consultants Rattan S Mama of Mumbai and another one based in Surat to work out different options and methods for the contracts, he said.

``The consultants are expected to give their report by middle of July after which we will submit it to the FMC for approval,'' he said.

The consultants would recommend the equity, guarantee fund requirement, level of funds and ways to manage it.

Contract guarantees are required toovercome any risks in the event of any default in forward contracts.

FMC had asked IPSTA to adopt contract guarantee in tune with the liberalised trading scenario currently.

Mariwala said FMC had initially withheld clearance to even July and August forward contracts.

``We then pleaded with FMC for 2-3 months time to fulfil the obligations. We also asked them to allow contracts up to October but FMC cleared only till August,'' he said, adding it was left for the FMC to decide further.

IPSTA, which had formed a committee with five of its directors and five general body members, was now apprising FMC of each and every development.

``The committee is supposed to meet regularly. But so far it has only approved the appointment of the consultants,'' he said.

Actually, some of the IPSTA members had wanted the bourse to use the First Commodities Clearing Corporation of India (FCCCI), which is involved in clearing the transactions at the bourse, for proving guarantee contracts but a good number of othermembers were apprehensive of it, Mariwala said.

``Some of us suggested to those opposed to the suggestion that we could try it with FCCCI for 2-3 years as FCCCI had agreed to guarantee contracts for five years at a fixed rate. But the majority of the members opposed it and we had no other option but to set up a guarantee fund,'' he said.

The decision was taken at a extraordinary general meeting, he said.

Mariwala said most of the IPSTA members were opposed to FCCCI guaranteeing forward contracts due to misconception about the functioning of such institutions.

``They felt that the banks which have stakes in the FCCCI would dictate terms to the bourse besides fearing that they would take control of IPSTA,'' he said.

Government's outlook to seek contract guarantees was to ensure better system and control of commodity futures exchanges, he said.

``Government wants futures exchanges to step beyond their present image and change to benefit all the people. It wants more depth in trading and bring incommodity funds,'' the IPSTA president said.

But most of the IPSTA members feared that things would go out of control as far as the exchange was concerned and it had now created a bad image for the association, he added.