August 09, 2007	Thursday	Rajab 24, 1428

KARACHI, Aug 8: Businessmen are confused on receiving an invitation for the official inauguration of the National Commodity Exchange (NCEL) at the Governor’s House on Thursday at 2.30pm, but they have been advised on telephone to come at 5pm.

The name of the chief guest is missing, but Prime Minister Shaukat Aziz is expected to perform the formal inauguration. The tight security arrangements for the president or PM in such ceremonies always delay start of the programme on time resulting in thin presence of invited businessmen.

With more than 400 members, the exchange will start operations with gold trading and then extend it to commodities like sugar, wheat, rice and pulses.

“It is another ‘casino’ in the town after Karachi Stock Exchange which is operating with exemption from capital gains tax for the last 33 years,” a market analyst remarked who feared that speculative trading in commodities will be institutionalised in the name of hedging.

Cotton availability and pricing issue has already divided the spinners into two organisations — All-Pakistan Textile Mills Association (Aptma) and the All Pakistan Textile Association (Apta).

Aptma is now being considered to represent the business interests of hardly a dozen top textile houses which have the capacity to purchase cotton for the whole year. The Aptma members are relatively less affluent and hence do not have the capacity of making huge purchases.

“Imagine the plight of these relatively less affluent spinners when hedging will push cotton prices to sky at the beginning of the season,” a market analyst said.

“We harvested a record 24 million tons of wheat this spring and price of wheat flour is Rs18 and Rs19 a kg,” a small food grain merchant said who is convinced that all hoarders and speculators of wheat trade will be further strengthened after the Commodity Exchange starts operations.

“In a country where there is no regulatory framework worth the name, the commodity hedging is a big manipulation,” the market analyst pointed out who said the speculators are taking full advantage of government’s weakness that has neither built storages and silos nor attempted to improve strategic reserve of grains.

In the last five years, the prices of wheat flour have jumped up from Rs12 to Rs18 a kg, Basmati rice from Rs35 a kg to Rs70 and Rs75 a kg and sugar from Rs18 to even Rs50 a kg on certain occasions.

“Imagine the power of these speculators and profiteers when they will be backed by an institution, like the National Commodity Exchange,’’ he said.

Exchange membership is said to be a quite affair that remains confined to a small club of elite businesses. It started with Rs1 million about a few years ago and is now Rs20 million in expectation of the opportunities available to make quick money from the commodity operations.

There is also a commodity exchange in Mumbai operating for the last few years. Indian media is crying hoarse on the tricks and ploys of its exchange which has spiralled prices of many commodities.

Grain merchants in Karachi fear that big commodity operators of India and Pakistan will join hands in Dubai to operate jointly the commodity exchanges in Karachi and Mumbai to exploit more than a billion people of the sub-continent.

“There are commodity exchanges in many developed countries of Europe and US,” the market analyst conceded but pointed out that these countries have a very effective regulatory framework, a strong legal system, powerful anti-trust laws and above all a capacity to maintain strategic reserves and intervene in market with subsidies and supplies whenever necessary.