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Govt Bans Sugar Futures

With the price of the commodity rising fast, govt has decided to impose a ban

A day after taking over as the food and consumer affairs minister, Sharad Pawar began his new innings at the ministry by announcing a ban -- on sugar futures.

While the ostensible reason that the government is doling out relates to its poll promise to keep in check the prices of essential commodities, yet the final push may have been provided by recent history. The government has been quite sensitive as to what had happened in its last term when rising prices of wheat and rice were blamed on the futures trading in stock markets, leading to howls of protest from the people at large and political parties across the spectrum of beliefs in particular, leading to an eventual ban being imposed.

This time, the axe has fallen n on sugar, prices of which have been on an upward move ever since Diwali. The commodity has risen by as much as 30 per cent -- from a low of Rs 18, prices of sugar have jumped to Rs 30, give or take a buck here and there, depending on the quality.

One of the reasons why sugar prices have been rising is that demand is high while domestic production is not enough to meet it fully. To check prices and make availability easier, the government has been importing sugar. This has been the case over the last 8-9 months or so.

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Recently, in fact as soon as the new UPA government was asked to form the new government, the ban on wheat futures had been lifted.

This was also the first time that the government has recognised the fact that prices of certain commodities is rising in spite of the wholesale price index remaining just above zero for weeks now.

The duration of the ban is till December.

Also, this may well be a signal by the government for speculators in other essential commodities to quit their activities as it is going to target all the factors that are driving prices of food items higher.

As expected, on Wednesday, the move hit the shares of sugar companies hard with some of them dropping by as much as 5 per cent on the Bombay Stock Exchange.