Ban on sugar futures doesn’t affect prices: government

The ban on futures trading of sugar has not helped in bringing down the prices of the sweetener in the market, as the cost increase was primarily driven by supply shortages, Parliament was informed on Tuesday.

In a written reply to a question in the Lok Sabha, minister of state for consumer affairs, food and public distribution K V Thomas said sugar prices are governed by global supply and demand factors. "There does not seem to be any perceptible benefit from the suspension of futures trading in sugar, as the prices in the physical market have been governed by the strong supply shortages," he said.

Futures trading in sugar was initially suspended from 26 May to 31 December last year and later extended till September 2010.

Stating that futures trading in a commodity is a mechanism for price discovery and price risk management, Thomas said, "It (futures trading) is not a mechanism to control the prices nor is it responsible for price rise in any commodity." The prices of any commodity are governed by the physical demand and supply factors, he reiterated.

"Sugar prices are also governed by the global supply and demand factors. Hence, it is practically impossible in this age of advanced information technology to keep our markets completely insulated from the price movements in the global markets," he said.