New Delhi: Perturbed by manipulations by speculators, the Rubber Board has urged the Forward Market Commission (FMC) to plug the intra-day price fluctuation in natural rubber futures trading at 2% from the 4% limit allowed at present.
Questioning the very “existence of futures ” in natural rubber, Rubber Board chairman Sajen Peter has said instead of achieving price discovery and stabilization, commodity future trading has given wrong signals to the market and fuelled volatility.
Though the FMC had reduced the daily price fluctuation in respect of all rubber futures contracts from 3% to 2% from July this year, the present arrangement allows volatility up to 4% after a 15-minute cooling time.
“As the price currently hovers around Rs85 per kg, a variation of 4% in a day is considerably high. The maximum possible intra-day variation needs to be plugged at 2% under any circumstance,” Peter said in his letter to FMC chairman B C Khatua.
Peter said natural rubber futures prices have been “unduly manipulated” leading to artificial bullish/bearish trends, which in turn are often transmitted into the sport rubber prices.
“This often leads to unwarranted volatility in natural rubber prices bringing serious hardship to all stakeholders in the rubber industry — growers, processors, dealers and manufacturers,” the Rubber Board chairman said.
He said the ”price bubble” in the domestic market from October to December 2006 prompted the tyre manufacturers to expect a still higher price from February onwards during the lean natural rubber production season.
The tyre industry, therefore, entered into large-scale overseas contracts for natural rubber resulting in import surge. Import during 2006-07 was 89,699 tonnes against 45,285 tonnes in the previous year. In the process, the closing stock at the end of March 2007 was 163,530 tonnes against 93,020 tonnes a year ago.
The board has demanded a holistic review of the functioning of futures trading in natural rubber to identify the weaknesses and rectify them.
“In the absence of such a review and immediate corrective steps, the logical basis of the existence of futures trading in NR is, to say the least, questionable,” Peter said.