Published On: Thu, Apr 16th, 2009

Rubber Board asks FMC to curb price volatility

The Rubber Board has asked market regulator Forward Markets Commission (FMC) to reverse the price fluctuation limit to 2% to curb volatility in rubber prices in futures markets.

“We have written to the FMC seeking checks to curb volatility in rubber futures,” Rubber Board chairman Sajen Peter said. The board has demanded the daily upper and lower price fluctuation limits be halved to 2% from 4% in the futures market, he said.

FMC sets the price fluctuation limit, also known as circuit limits, to regulate the prices. Trading is stopped if the prices shoots up beyond the set limit. “Now that the rubber prices are ruling firm, we have requested the regulator to roll back limits to earlier level of 2%,” Mr Peter said.

The rubber price limits earlier stood at 2-3%, but were later extended to 4%, when rubber prices fell drastically below Rs 60 a kg. Recently an apex tyre manufacturers body the Automotive Tyre Manufacturers Association (ATMA) had sought an immediate rollback of the circuit limit to 2% saying that certain speculators in the futures segment are causing a huge distortion in the market. Futures prices of rubber for May delivery on the NMCE platform, where maximum natural rubber is traded, surged by 29% to Rs 100 a kg on Thursday from Rs 77 a kg on January 16.

To contain price rise, the government in May 2008 had banned futures trading in the commodity, but later in December lifted the curb. Like the prise rise in futures market, the rates went up in the spot market as well where they touched Rs 100 a kg, higher than the international prices, the official data showed.

ATMA director general Rajiv Budhraja had said that rise in circuit limit in natural rubber trading on commodity exchanges has played a role in price volatility.

The domestic tyre industry may resort to import, if the situation does not improve, he had said. According to the Rubber Board, natural rubber production in 2009-10 is expected to touch 8,67,000 tonnes compared to 8,65,000 tonnes last fiscal. Similarly, consumption is expected to rise to 8,75,000 tonnes from 8,66,000 tonnes during the review period.