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NCDEX mulls new ways to attract farmers

Our Bureau

"NCDEX warehouse receipt will be in electronic form. The produce will be graded and the grading will have a validity period."

Chennai , Aug. 25

THE National Commodities and Derivatives Exchange (NCDEX) is mulling introduction of a slew of measures, including commodities-based financial instruments to attract participation of farmers.

"These instruments will give farmers the option of holding back their produce if the prices are low. They can also get up to 80 per cent funding of value of their produce from the banks," the NCDEX Managing Director and CEO, Mr P.H. Ravikumar, told Business Line.

Banks had shown interest in the instruments and were willing to introduce them, he said.

According to Mr Ravikumar, almost all major banks are keen on introducing the instruments.

One of the instruments planned by NCDEX is the warehouse receipt system.

It is currently seen as one that can drive futures trading.

In fact, futures exchanges are increasing looking towards farmers' participation for their success and to drive the volume turnover.

Coffee Futures Exchange of India (Cofei) Ltd was the first to introduce warehouse receipts to certify actual stocks surrendered to the certified warehouse by traders.

However, one reason for the warehouse receipt system not being popular is that the banks do not recognise it as a financial instrument.

But the Agriculture Ministry has proposed to make it a fully negotiable instrument that can help pledge financing.

An inter-ministerial task force last year submitted a report targeted Rs 7,000 crore worth of pledge financing by the year 2006-07.

"NCDEX warehouse receipt will be different from others. One, it will be in electronic form. Two, the produce will be graded and the grading will have a validity period. These should help bank fund the growers," Mr Ravikumar said.

Companies such as SGS will do grading of the produce.

Among other steps planned by NCDEX to attract farmers are providing spot rates of various agricultural commodities from various mandis/markets.

"We will provide our members spot rates of various agricultural commodities by getting it from the Agriculture Ministry and markets. This can help them to decide on offers and bids for futures," he said.

Canara Bank, HDFC Bank, ICICI Bank and UTI Bank have evinced interest to become clearing banks for NCDEX.

On the other hand, HDFC Bank, ICICI Bank, Bank of Baroda, Canara Bank, IDBI Bank and IndusInd Bank are interested in being depository participants of the proposed exchange.

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