Kolkata: Scope of the futures market in tea was discussed at a high-level meeting held at the Tea Board office here on Wednesday. Basudeb Banerjee, Chairman of Tea Board; the Deputy Chairman, Roshni Sen; and member of the Forward Markets Commission, Rajeev Agarwal, were present.
Representatives of the National Commodity & Derivatives Exchange, Multi Commodity Exchange of India Ltd, Indian Tea Association, Tea Association of India, Calcutta Tea Traders Association and Indian Merchant Tea Exporters’ Federation also attended the meeting.
Later talking to Business Line, Agarwal said the benefits of having the futures market in tea were discussed at the meeting. “The exercise was on sensitising the tea industry about the futures market and explaining the possibility of launching futures contracts in tea,” Agarwal said. “The futures market can be of help to the tea industry in price discovery, i.e., the discovery of the right price, and in price risk management.”
However, the representatives of the tea and trade industry explained the difficulties in designing a contract for representative varieties of tea because of wide variations in grades. Also, it was pointed out, the production of tea being dependent on the vagaries of nature, it might be difficult to guarantee the promised quality and quantity at the time of delivery.
The possibility of designing a tea index was also discussed, Agarwal said, pointing out that the index should cover certain specific varieties of tea which would reflect the price movement and also provide opportunities for hedging to the stakeholders.
The Tea Board Chairman felt that the commissioning of e-auction in tea would expedite the process of futures trading in tea. The e-auction, he said, would be launched within this year.
Representatives of the National Commodity & Derivatives Exchange, Multi Commodity Exchange of India Ltd, Indian Tea Association, Tea Association of India, Calcutta Tea Traders Association and Indian Merchant Tea Exporters’ Federation also attended the meeting.
Later talking to Business Line, Agarwal said the benefits of having the futures market in tea were discussed at the meeting. “The exercise was on sensitising the tea industry about the futures market and explaining the possibility of launching futures contracts in tea,” Agarwal said. “The futures market can be of help to the tea industry in price discovery, i.e., the discovery of the right price, and in price risk management.”
However, the representatives of the tea and trade industry explained the difficulties in designing a contract for representative varieties of tea because of wide variations in grades. Also, it was pointed out, the production of tea being dependent on the vagaries of nature, it might be difficult to guarantee the promised quality and quantity at the time of delivery.
The possibility of designing a tea index was also discussed, Agarwal said, pointing out that the index should cover certain specific varieties of tea which would reflect the price movement and also provide opportunities for hedging to the stakeholders.
The Tea Board Chairman felt that the commissioning of e-auction in tea would expedite the process of futures trading in tea. The e-auction, he said, would be launched within this year.
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