Is guar the next commodity that is likely to be banned by the Forward Markets Commission?
Demand for ban on futures trading in guar is rising day by day. Last week, the Commerce Ministry asked the Forward Markets Commission, the apex commodity market regulator to review guar futures.
The Ministry, which has received innumerable memorandums from guar farmers and trade associations, said that trading in the rain-fed crop is confined to a small fraction of market players.
"There is a clear case for reviewing guar futures as it is largely controlled by handful of players. This is evident in the fact that there is very little delivery in guar futures," said Jairam Ramesh, Minister of State for Commerce.
The minister has already held a number of meeting with guar traders and exporters.
Deliveries for the April guar seed contract, which expired on Apr 20, were at 1,280 tn against stocks of 33,248 tn in warehouses of National Commodity and Derivatives Exchange. Deliveries for April guar gum were at 490 tn against stocks of 7,090 tn.
In the last few months, a number of guar traders and exporters have been demanding a ban on futures arguing that price movements in the commodity have turned volatile.
Demand for ban on the commodity has increased ever since the FMC banned futures trading in wheat, rice, tur and urad in the last few months. Online trading in these commodities were banned after prices of essential commodities moved up, leading inflation to cross the 6 digit figure.
The government has set up the Abhijit Sen Committee
to study the impact of futures trade on prices of agricultural commodities. The Committee recommendations are expected by May end.
FMC officials said there is move to immediately ban futures trading in guar, though the Commerce Ministry has asked it to study the case.
Guar is a crop of semi arid - sub tropical areas spread over the north and north west of India and east and south east of Pakistan. It is grown in arid zones of Rajasthan, some parts of Gujarat, Harayana, Madhya Pradesh. The main guar-growing region in India is Rajasthan.
Guar is a rain fed monsoon crop, which requires 8-15 inch of rain in 3-4 spells and is harvested in October - November. It is sown immediately after first showers say in July and harvested around November each year. The crop yield is directly related to the monsoon. It requires a relative long growing season of 20-25 weeks.
India is the major producer of guar Seed followed by Pakistan and US. India's guarseed production fluctuates between years and has been around 200,000-600,000 tons in the recent years. India's guar production in 2003, is estimated at around 600,000 tons.
India accounts for 80 per cent of the total guar produced in the world. Seventy per cent of India's production comes from Rajasthan. The other producers are Gujarat, Haryana, Punjab, Uttar Pradesh and Madhya Pradesh.
World market for guar gum is estimated to be around 150,000 tons/year, 70 per cent of which is produced by India and Pakistan.
The export from India is around 115,000 tons and the domestic market is of around 25,000 tons.