Jul 31 2009 4:30PM
NEW DELHI, July 31 (Reuters) - The Indian Sugar Mills Association (ISMA) is investigating some three-year old derivatives market losses and planning to restructure, the recently-retired head of the body and industry sources said.
The investigation centres on hedging losses by the Indian Sugar Exim Corp (ISEC), which ISMA manages jointly with another trade body, sources said.
Two sources in ISMA's secretariat and two senior mill owners who are members of the trade body said that an accountancy firm had been appointed to investigate the matter and the trade body was also seeking legal advice.
S.L. Jain, who headed India's premier sugar body for more than two decades before stepping down this month, said there may have been some hedging losses in 2006, but they were relatively small, about 80-100 million rupees ($1.7-$2 million).
"I said yes, please investigate everything because now that I am going, nobody should point any finger at me. So let us go into this matter in depth," Jain told Reuters.
"I don't exactly remember now, some losses must have occured... On the other hand, in the physical, profits were much higher. It is a hedge operation. People don't understand what is hedging."
Jain said he has fond memories of his long stint at ISMA, which included his role in making India a player in the raw sugar trade, but had faced difficulties in the last few months.
"The atmosphere I found was not congenial to me. Everybody knows I'm a rather aggressive person. I take things into my hands," he said.
In recent months, ISMA has faced criticism in sections of the government, as official estimates of sugar stocks and supplies were higher than industry estimates.
Jain's well wishers say he had a vast network of contacts in industry and government, which he used to help local mills, while his critics say his style of operation was too centralised and he was blunt even in his dealings with some bureaucrats.
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