Tyre Manufacturers Want Prohibition On Rubber Futures

Chennai: Tyre manufacturers said that rubber futures are not helping in price discovery and risk management, and they have demanded a ban on forward trading of the commodity. In a letter to the Commerce, Industry and Department of Industrial Policy and Promotion Secretaries, the Automotive Tyre Manufactuers Association (ATMA) has said the demand for ban on rubber futures is no different from the bar imposed by the Centre on forward trading in urad, tur, rice and wheat. The steep increase in the rate of rubber has imposed severe financial burden on the tyre industry. The wild future quotations in respect of rubber had gone beyond the basic objectives of future trading and resulted in spot rate getting distanced to cost plus reasonable profit to the grower.
The average market price of rubber during April 2006- February 2007 was Rs 95 per kg against what the Rubber Board had stated as a reasonable rate of Rs 70-80 a kg. It is important to note that the reasonable price for rubber at Rs 70-80 has been assessed by the Rubber Board Chairman as one of the unsaid mandate for the board to ensure that the grower gets his due share by way of cost plus reasonable return/profit. Though traded volumes are low, it creates an upward momentum and the physical trade looks upon the futures for market direction. Hence, spot rate increased immediately. This results in growers deciding to hold back their produce in the hope of getting even higher prices.