NCDEX, MCX have submitted reports with regulator, one report awaited

The government will soon decide on the relisting of guar futures, Forward Markets Commission (FMC) chairman Ramesh Abhishek said on Thursday, more than a year after the regulator had suspended futures trading in the commodity amid suspicion of foul play in jacking up prices.

“The two exchanges (National Commodity and Derivatives Exchange and Multi Commodity Exchange) have submitted their reports and we are expecting one more report. We are assessing the situation and we will take a decision very soon,” Abhishek told FE, amid market speculations that the regulator would allow the relisting of guar futures in 2-3 days.

Last year, the regulator had asked the NCDEX to suspend guar gum and seed futures from March 27 after a more than ten-fold rise in futures prices in just one year. However, spot prices of guar gum and guar seeds were ruling even higher than futures prices before fresh positions were banned.

An advisory committee, set up under the chairmanship of Abhishek to study the entire spectrum of guar supplies and trade, had also recommended the relisting of guar futures. The consumer affairs ministry then directed the FMC to decide on the proposal after assessing the recommendations of the advisory committee, price trends, farmers’ interest and the ground realities. The FMC had asked three major commodity bourses to submit their reports on guar supplies so that a comprehensive view of the situation can be taken. The NCDEX report says 61% of guar stocks in its warehouse were held by farmers.

Significantly, the FMC in January last year had barred Jaipur-based commodity trader Hindustan Technosol from primary membership of commodity exchanges for six months for violating guidelines of the Forward Contracts (Regulation) Act. The regulator had also directed NCDEX to start disciplinary actions against Ganganagar Commodity for the violation of its by-laws and regulations. The company was found guilty of tweaking rules to hedge position in guar gum and guar seed for a few months.

Demand for guar gum ? extracted from guar seed, used as sealant in oil and natural gas drilling ? has shot up in the past one year as soaring crude oil prices have made it profitable for US prospecting firms to drill for shale gas, which was considered unremunerative earlier. Shale gas producers use the commodity for hydraulic fracturing, or fracking.

Analysts said huge export demand and a smaller harvest have boosted guar seed prices. The country is expected to have produced 1.4 million tonne of guar seeds in 2012-13 compared with 1.7 million tonne a year before. Rajasthan accounts for around 70% of India?s guar seed output.

Guar gum exports have jumped around 139% during the April-January period to around $4.9 billion, showed official data. Guar gum exports had a more than 14-fold jump in the two years through March 2012 to R16,523.83 crore, and also recorded a nearly six-fold rise over 2010-11, official data showed

BACK FROM THE BAN?

* In March last year, FMC had asked the NCDEX to suspend guar gum and seed futures after a more than ten-fold rise in futures prices in just one year

* An advisory committee, set up to study the entire spectrum of guar supplies and trade, had recommended the relisting of guar futures

* Demand for guar gum has shot up in the past one year as soaring crude oil prices have made it profitable for US prospecting firms to drill for shale gas.