May 26 (Bloomberg) -- India banned futures trading in sugar, a day after Farm Minister Sharad Pawar said the government may extend a program allowing duty-free imports of raw sugar to bolster local supplies.
The ban will remain until Dec. 31, Forward Markets Commission spokesman Anupam Mishra said today, without giving a reason for the move. While existing contracts will remain valid, new contracts won’t be allowed, he said in a telephone interview today from Mumbai.
Sugar prices have risen 3 percent on Mumbai’s National Commodity & Derivatives Exchange since April 20, when N. Sanyal, joint secretary at the food ministry, said futures trading may be halted if prices continue to rise. The increase in prices is not related to futures trading, analyst Amol Tilak said.
“The government thinks futures trading is responsible for the price increase, which is not the case,” Tilak, an analyst at Kotak Commodity Services Ltd., said by phone from Mumbai. “Prices are rising because of the supply constraint. In the recent past we have observed that whenever there is a supply deficit in any particular agricultural commodity they resort to banning futures in that.”
India’s sugar output may total 15 million tons in the year ending Sept. 30, Sanyal said. That compares with the 14.8 million tons forecast by Samir Somaiya, president of the Indian Sugar Mills Association. Output was 26.4 million tons last year.
Net Importer
Sugar futures on Mumbai’s National Commodity exchange in April rose to the highest since trading began in 2003 on forecasts of lower output. A decline in sugar production for a second year has forced the South Asian country to become a net importer for the first time since 2006, and fueled a 33 percent rally this year in raw-sugar prices in New York.
The government last month allowed duty-free imports of raw sugar until Aug. 1 to be processed and sold domestically, without any export obligation. Under an earlier program still in effect, the mills can import raw sugar without duty until Sept. 30 for processing and selling locally, provided they export an equivalent quantity of refined sugar within three years.
Source : Bloomberg.com