It is a complex that has performed much better than any other commodity in the last 15 months. Since January 2011, it has given a return of more than Rs 125 for every Re 1 invested. Even in the last three months, returns from the complex have quadrupled. If you are wondering what commodity we are talking of, then it is guarseed and guar gum. However, a close look at guar basics shows that the complex has some discrepancies. The Forward Markets Commission (FMC), the Consumer Affairs Ministry and Finance Ministry seem to be unaware of the ground reality.

PRODUCTION FIGURES

Guarseed has increased to around Rs 30,000 a quintal from Rs 2,334.30 on January 1 last year. At the start of this year, it ruled at Rs 6,789.45. In the case of guar gum, prices have increased to nearly Rs 96,000 a quintal from Rs 6,364.30 on January 1 last year, and Rs 22,565.45 at the start of this year. Analysts and traders point fingers at surging exports for the rise in the guar complex since January last year. But the real story is how common sense has failed all of us. Let's see what is wrong with the guar complex.

The accompanying table gives production figures from 2005 onwards when the output of guar, a legume crop grown during the kharif season, began to surge in the country. As can be seen, 2009 turned out to be a year when production plunged to 2.5 lakh tonnes due to a prolonged dry spell in the country. Production surged again in 2010 to a record 15 lakh tonnes, before dropping to 12.1 lakh tonnes last year. Every 100 kg of guar yields 33 kg of guar gum. The production of guar gum in 2008 would have been 3.3 lakh tonnes. The following year, due to a lower crop, gum output would hardly have been 80,000 tonnes, before rising to around five lakh tonnes last year. For the current fiscal, gum production is likely to be around four lakh tonnes.

The scenario is revealing if the output is compared with export data put out by the Agricultural and Processed Food Products Export Development Authority (Apeda). According to the data, export during 2008-09 was 2.59 lakh tonnes. If domestic consumption of 50,000 tonnes is taken into credit, then it leaves a carryover stock of some 24,000 tonnes for that year. It is likely that the final season stocks could have been higher from the 2.85 lakh tonnes guar gum produced in 2007.

The scenario changes drastically in 2009 due to production dropping to an 11-year low. That year, guar gum production was only 80,000 tonnes. However, the carryover stock from 2008-09 was 1.5 lakh tonnes. Therefore for 2009-10, a total of 2.3 lakh tonnes of guar gum was available. Exports during 2009-10 fiscal were 2.18 lakh tonnes. That would have left a meagre 12,000 tonnes for domestic consumption and no carryover stocks at all!

DISCREPANCIES

It is from here that figures seem all wrong. In 2010, production was a record 15 lakh tonnes, resulting in a guar gum production of 4.95 lakh tonnes. Exports during 2010-11 were 4.04 lakh tonnes. If domestic consumption is added, then the carryover stocks would, probably, have been 40,000 tonnes. That brings us to export figures for the current fiscal. This is where the suspicion of a farce being played out rises. Guar harvest begins only in October. How can guar gum exports touch 1.44 lakh tonnes by June? Again, for the April-October period, the data show exports of 3.48 lakh tonnes, a surge of 2.04 lakh tonnes in just four months! Data for the April-November period are amusing. Statistics show exports in the first seven months of the fiscal were 6.71 lakh tonnes, three times more than exports during that period a year ago.

The annual capacity for processing guar gum in the country is six lakh tonnes. How did guar gum shipments increase by 3.23 lakh tonnes within a span of a month? For such quantity to be shipped, the entire guar crop should have been processed! Can this happen when the monthly processing capacity is 50,000 tonnes? Also, Apeda figures peg the unit value realisation during April-October at Rs 1.41 lakh a tonne. For the April-November period, it drops to Rs 97,000 a tonne!

Guar gum exporters have been repeatedly representing that export data are wrong, but in vain. The fact is: To export 6.71 lakh tonnes, guar production should be nothing less than 20 lakh tonnes. If export data are right, are production figures wrong? The lurking suspicion is that either the data are wrong or something else is being exported in the guise of guar gum. Why is the Commerce Ministry blind to these facts and figures?

EFFORTS IN VAIN

The FMC has come up with a slew of measures since December 2010 to curb the rally in the guar complex. It included surprise checks and issuing showcause notices to a few traders. What happened after that? The FMC's efforts have been in vain. Currently, anyone taking a long position in the guar complex has to pay 60 per cent of the margin in cash immediately. For example, if someone buys a unit of guar gum that is five tonnes for delivery in April, then the buyer will have to pay more than Rs 28.5 lakh at current price. Similarly, anyone taking a position in guarseed will have to foot nearly Rs 18 lakh for a unit of 10 tonnes. Who can afford to have such huge sums locked in for a long period? How are they able to afford it?

For example, the open interest for the June contracts is 18. Who holds these positions? It is pure speculation without any fundamentals that is driving the guar complex. Why can't the Income Tax Department find out how players who are taking long positions are sourcing the margin money? Grapevine has it that the guar complex rally is being sparked off by an ego clash between two traders in Jodhpur. And rumours also say that guar gum could be driven up further.

But consultants in the US are already advising their clients to refrain from buying guar gum. A few broking houses in India have stopped giving advisories on the guar complex since they aren't confident of the data put out by Apeda. It looks like a major scandal is taking place in the guar complex. It is time a high-level probe is ordered into the matter. And it is time for the Centre to review its exports data, too.

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