NCDEX launches forward contract for farm goods

NCDEX launches forward contract for farm goods

Our bureau
New Delhi, Oct 6:

For first time in the country, leading commodity exchange NCDEX has launched a pan-India forward contract on its electronic platform for facilitating trade between Farmer Producer Organisations (FPOs) and bulk buyers of agricultural commodities.

Titled as ‘Agrim Sauda‘, the contract would allow farmers and processors, exporters, traders and other agri value chain members, a NCDEX statement recently stated.

To begin with, the forward contract would be offered for sugar and maize and will be extended to other commodities in the next few months.

Agrim Sauda will help increase the geographic reach of buyers and sellers who initially had to incur huge transaction cost. With this, a buyer or a seller from one part of the country has the benefit of being able to buy or sell any commodity in any other part of the country,” the exchange statement noted.

Unlike the futures contracts wherein the contract specifications are standardised, the forward contracts’ will allow trading parties to negotiate issue such as quantity and quality of the specified commodity, date, place of delivery and settlement price.

NCDEX also said the government procurement agencies can also benefit from this segment. “By making price predictability less onerous it is also likely to contribute in the development of storage infrastructure for traded commodities in and around its major producing and trading areas,” Samir Shah, Managing Director, NCDEX, said.

Shah said “India needs well-functioning agricultural markets where rising incomes improve the lives of millions of farmers and high quality food can reach 1.25 billion consumers, thereby becoming an integral part of inclusive growth transformation,”.

Meanwhile, Small Farmers’ Agribusiness Consortium (SFAC) which is setting up first Kisan Mandi in the next couple of months in Delhi has envisaged interest in participating in the NCDEX platform for sourcing various commodities

“We will definitely evaluate the forward contract model and will ask some of the FPOs to participate in the electronic platform for expanding their base,” Parvesh Sharma, managing director, Small Farmers’ Agribusiness Consortium (SFAC), told FE .

To sell their produce through these new kisan mandis, the farmers won’t have to pay the agents’ commission 6% in Delhi right now in the Delhi APMC market and the mandi tax (1%). This will help farmers get remunerative prices and bypass middlemen. Fruit and vegetable prices will as a result reduce by 20-25%.

Farmers can showcase their produce in these mandis, which will be directly delivered to bulk consumers like resident welfare associations and corporate retailers and hotels, Sharma noted.

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