The Forward Markets Commission (FMC) is set to impose a penalty of Rs 100 crore on a cartel which has been found to be behind the surge in guarseed and guargum prices on futures exchanges to record high last year.

Guargum prices had soared to over Rs 1 lakh a quintal and guarseed to over Rs 30,000 in March last year, forcing the commission, which regulates commodities markets in the country, to suspend futures in both.

An official of the FMC said that the Government will be taking action based on a report submitted to the Consumer Affairs Ministry in October last year, on the unusual price movement.

The report had found fault with at least 45 traders.

Responding to question on the report, the official, who did not wish to be identified, said: “The Government is taking action on the report. Notices have been issued and soon, Rs 100 crore penalty will be imposed on the cartel found to be behind this.”

The official, however, refused to provide details of the cartel. In May last year, the FMC penalised nine commodity brokerages, including Angel Commodities, Kotak Commodities, Reliance Commodities and Karvy Comtrade, for violating rules in collecting margin money from traders punting on guar gum futures.

Guar or cluster beans, a leguminous crop, is primarily grown in Rajasthan, besides Haryana, Punjab, Gujarat and Madhya Pradesh. Rajasthan accounts for over 70 per cent of the total crop in the country.

Guarseed is a raw material for producing guar gum.

Guar gum is used as a thickening agent and additive in food products such as instant soups, sauces, processed meat products, baked goods, milk and cheese products, yoghurt and ice-creams.

It has industrial applications in the paper and textile sectors, ore flotation, explosives manufacture and fracturing of oil and gas formations.

Currently, guar gum is in demand for fracking of shale gas, particularly in the US that accounts for 25 per cent of the world trade.

Guarseed and guar gum prices had run to record high early last year despite the FMC imposing additional margins; investors had to payat least Rs 15 lakh to take positions in guar gum.

Then, investors had justified the surge, pointing out to Government data on exports of guar gum.

Initially, the data showed 70 per cent increase in guar gum exports in the first half of 2011-12 fiscal.

The data wererevised later by the Government since the industry pointed out that the crop figures and export data of guar gum didn’t match.

Meanwhile, prices of guarseed and guar gum which began to rise early this month on reports of dryness in the growing areas have dropped by 25 per cent on Tuesday.

This follows the FMC directive to the futures exchanges to scrutinise the sudden spurtfrom August 12.

On Sunday, the FMC Chairman Ramesh Abhishek said on the sidelines of a meet in Mumbai that prices of guarseed and guar gum futures, which resumed in May this year, have begun to drop after he asked the futures exchanges to probe the accounts of their top 25 clients.

“We sought details on hedgers, buyers and sellers in guar (seed and gum) within 15 days. A big cartel seems to be funding the rise through some participants. We have asked exchanges to try and find out the source of funds from these participants. The exchange will penalise the members found guilty,” the chairman said.

Guarseed and guargum futures resumed from May 14, following the commission’s go-ahead.

Guarseed contracts, which are to be delivered in October, opened at Rs 7,730 a quintal on May 14 and dropped to Rs 4,040 on August 12 on speculation that guar production could be a record this year on bountiful monsoon rains. Guar gum contracts for the same month during the same time, dropped to Rs 11,430 a quintal from Rs 24,500.

On September 12, guarseed prices rose to Rs 7,963 and guar gum to Rs 22,380 after which the commission sought details.

On Tuesday, guaraseed contracts dropped to Rs 5,990 a quintal and guargum contracts to Rs 16,900.

subramani.mancombu@thehindu.co.in

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