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BOOE to begin palmolein futures next week

Our Bureau

MUMBAI, Aug. 10

THE Centre has permitted the Bombay Oilseeds and Oils Exchange Ltd (BOOE) to launch futures trading in refined bleached deodorised (RBD) palmolein. The permission is valid for a period of five years with effect from August 8, 2000.

With the issue of notification dated August 7, 2000 by the Ministry of Consumer Affairs and Public Distribution the suspense over grant of permission for futures trading in a commodity not of domestic origin has come to an end. India imports over 25 lakh tonnes of refined palmolein which constitutes a quarter of the total domestic consumption.

Last week, the Government authorised BOOE to launch futures trading in six other commodities, namely groundnut, its oil and cake as also sunflowerseed, its oil and cake.

Mr. Navinchandra Shah, President of BOOE, told Business Line, that a soft launch of the futures contracts for oils - refined palmolein, expeller groundnut oil and refined sunflower oil - had been planned for August 18.

The country's vegetable oil trade and industry has been looking forward to the launch of futures trading in the commodities of interest to this sector. Over the last three to four years, the domestic market had been volatile, closely reflecting internati onal trends. Many players burnt their fingers because of adverse price movements against which they had no hedge. Up to 40 per cent of the country's edible oils consumption requirement is imported.

The market has been functioning on the basis of incomplete information, wild speculation and lack of price discovery. Wide fluctuations subjected the players in the market to price risks and no effective hedge instrument was available to cover the risk. Futures trading will not only lead to price discovery, but also help manage price risks.

The country's vegetable oil market has all along been a cash market. It had to enter into contracts on ready delivery basis as forward and futures trading was declared illegal. Hedgers have always been wary of taking forward positions - even in the grey market.

The biggest challenge before the BOOE would therefore be to quickly attract a large number of players and rapidly expand trade volumes. Some other exchanges with an eye on refined palmolein futures are waiting and watching.