The government should ban futures trading in sugar, according to the Bombay Sugar Merchants? Association (BSMA).
The association has requested the Forward Markets Commission (FMC) to ban futures trading in sugar for at least next one year – till end of the next season 2008-09. By that time, the government may be inclined to do away with the monthly release mechanism and also bring about full freedom for import and export. The association feels that future trading is inconsistent with the operation of the monthly release mechanism.
?None of the needed objectives such as price discovery, hedge and arbitrage facilities, and farmers? guidance, permitting futures
trading in a commodity are being fulfilled by these operations. Futures exchanges have become a den for speculators who have entered this business for making the fast buck,? Mukesh Kuvadia, secretary BSMA said.
The government has continued with the regulation regarding the monthly release mechanism, which naturally controls the quantity of sugar that can be sold. The government also keeps on tinkering with the release mechanism from time to time ? either by increasing the quantum of monthly release or by extending the time limit for completing the sale of released sugar, he said, in a memorandum submitted to FMC.While the government?s anxiety to maintain sugar supplies on an even scale all the throughout the year is understandable, it needs to be realized that removing the sales/stock restrictions completely and permitting unlimited futures trading are measures not consistent with the controls exercised on the release of the sugar from the factories in the open market, he added.