The exchange has been practically non-functional since March 27, when the Forward Markets Commission (FMC) stopped further dealings following the discovery of large-scale illegal trades in the May contract. Only deals of a squaring up nature were allowed.

Incorporated in 1956, the exchange is the only recognised association under the Forward Contracts (Regulation) Act, 1952, for regulating futures trading in turmeric in the whole world. But its future is clouded, thanks to poor trading interest and excessive speculation among the handful who are still interested. On May 5, for the first time in its history, the exchange's 15-member board declared two members defaulters.

The exchange's misfortunes havenothing to do with the fortunes of the commodity it trades. Turmeric has a good trade prospects --both domestic and international -- it being a natural colourant used in dyes and cosmetics. It is also known for its medicinal properties. Turmeric exports have jumped to Rs 75 crore in 1997-98 from Rs 58.45 crore in the previous year and Rs 46.20 crore in 1995-96. These trends should have been a happy augury for pepping up futures trading, but that hasn't happened.

While illegal trading outside the exchange has been buoyant, inside the ring there is very little interest. The number of active members has fallen to around 10 against the official registered number of 89. In the tangled May 1998 delivery contract -- which landed the exchange in one of it worst troubles of the last few decades -- there were just seven active members, two of whom were declared defaulters. The two defaulter firms -- JK Spices and Sadguru Trading -- belong to none other than a former chairman of the exchange, Jitendra Keshavdas Shah(JK).

Only feeble efforts, if at all, are underway to rescue the exchange from the clutches of the handful of speculators from Mumbai, Gujarat, and Sangli; the majority of the traders do not seem to be interested in continuing futures trading there. So there is a good chance that the Sangli turmeric exchange may close down; in the meanwhile, efforts are on to shift futures trading in turmeric to the Bombay Oilseeds and Oils Exchange (BOOE) at Vashi (Navi Mumbai), which is said to have been promised an additional trading centre for turmeric by the government.

The Sangli exchange's recent request to fill the three vacancies of public directors on the board has had no response from the FMC so far. As for the traders themselves, they have made little efforts on their own to solve their problems; instead they have sought the intervention of FMC chairman Vijay K Aggarwal.

"We are studying the situation", says Aggarwal, who has finally agreed to visit the exchange "some time during June" to assess thesituation before deciding whether or not to give the nod for recommencing futures trade in turmeric.

A free-for-all prevailed at the Sangli exchange before the FMC forced daily clearing of contracts early this year. This brought to light the malfunctioning of the exchange. For example, JK's firms are understood to have cornered deals involving nearly 65,000 quintals of May delivery turmeric, when exchange rules say that only 3,000 quintals can be carried forward on any day. When the exchange tried to settle the deals at lower than transacted prices, JK went to court -- where the matter is still pending. The FMC, given the poor trading conditions in Sangli, decided to suspect futures on March 27. Trading was permitted last month, but only to square off the earlier tangled deals -- which seems to have been done. But futures deals continue to remain suspended.

May 20 was the last day for squaring off pending deals in the May delivery contract, but the exchange authorities have not approached the FMC forcommencing futures trading in the July contract. Earlier, in mid-March, the exchange had approached the FMC for beginning the July delivery contract, but did not get the go-ahead.

Interestingly, despite the stalemate at the exchange, the ready turmeric market is said to be thriving in Sangli. According to exchange chairman Vanechand P Shah, three major factors have emerged over the past decade to reduce the exchange to its current status. One, a new generation of traders has emerged which does not seem interested in continuing with the tradition of trust and commitment -- which are key factors in futures trade. This has vitiated the atmosphere, resulting in mutual mistrust among traders. Most of these new generation traders operate by using the membership cards of older, respected firms.

Two, there is a "total lack of understanding and interest" among FMC officials, he alleges. And three, the value-based stamp duty levied by the Maharashtra government on turmeric trade is "too high", prompting traders toconduct trade outside the exchange, which may be illegal. Also, other states like Calcutta (jute), Kochi (pepper) and Hapur (gur) among others do not levy stamp duties on the commodities traded in their respective exchanges.

"The FMC should consider these aspects while also considering the introduction of options trade if it intends to infuse fresh life into the exchange," said Shah.

"The recent happenings are not good for the exchange," said a top source at the Sangli exchange. The practices adopted have seriously affected the overall trading sentiment and the status of the exchange. This can't go on indefinitely."

Five years ago, daily volumes in futures trading in turmeric were said to be around three lakh atkis (quintals). In the recent May delivery contracts, daily volumes dwindled to around 15,000-18,000 atki. The FMC had put a limit of just 3,000 atki per member, but some of the traders had taken the liberty to trade as high as 65,000 atki per member!

"Traders have little preference for futurestrading on the exchange," says Ramesh Patel of Patel Manorbhai Joitram, one of the leading turmeric and gur traders. "Mistrust and fear of getting entangled in trades are some of the major factors why traders here do not seem to be interested in futures trade anymore."

However, despite this pall of gloom, there lingers a hope of revival. Says an exchange official: "In their own interest, members need to understand that regulations need to be followed. Given the globalisation of trading activities, the government is keen to reintroduce futures in domestic commodity exchanges. The members can take advantage provided they strictly follow rules framed by the FMC."

Cooperative banks to lend Rs 35 cr to turmeric trade

Turmeric is stored in huge underground pits called pews. Each pew can store 175 quintals of the commodity for almost three years. There are over 2,100 such pews in Haripur and Sangalwadi in Maharashtra's Sangli district -- the centre of turmeric trading. It is against these stored goodsthat cooperative banks in and around Sangli extend credit of Rs 35 crore-plus to turmeric traders.

Some three years ago, a peak time for turmeric trade, storage charges were Rs 55 per bag of 50 kg. Currently, it is just Rs 5 per bag. Little wonder, therefore, majority of these pews are lying utilised.

According to BB Bapusaheb Pujari, vice chairman, Apex Cooperative Bank of Urban Banks of Maharashtra and Goa Ltd, "There have been no defaults or NPAs for the banks in years. But, of late, traders seem to have become disinterested in futures trading and, therefore, do not take loans from banks."

Financing pews is a unique arrangement between farmers, banks and turmeric traders in Sangli, wherein the banks extend 70 per cent of funds on the "market value" of turmeric and retain a 30 per cent margin. Anyone intending to claim the stored turmeric in pews has to first make the requisite payment to the concerned banks. As prices have been rising each year, there is hardly any fear of loss of value forbanks.

Pujari, however, fears that the futures trade in turmeric may move out of Sangli "sooner rather than later" if the current trend is any indication. "What may remain here is the ready market because of the locational advantage." Most of the turmeric is grown in the district.