Still to match the benefits of face to face deals.
Musaddilal Khere (name changed), a grain trader at the Vashi-based Agricultural Produce Market Committee (APMC) doesn’t wish to try online trading. It lacks the advantages in face-to-face dealing, he says.
He’s happy dealing with local brokers and arhatiyas (commission agents), despite the online exchanges available for daily buying and selling. Manual dealing with grain brokers allows him to sell over 10 tonnes of wheat and pulses daily. One plus, he says, is the sample of grain before him: the arhatiya always brings 200-250g of the commodity along. It helps him judge the quality and the selling propensity in the market, as he negotiates the price.
The second plus, he says, is the convenience, where business worth crores of rupees gets transacted based on only a telephone call or a small piece of paper from either side. Then again, if the goods supplied to the market yard vary in quality, Khere gets an opportunity to negotiate price further with the mediating broker or between buyers and sellers.
You will not get such confidence and liberty while dealing with online spot exchanges, which are hardly a year old and yet to find their feet, says Khere.
Both the MCX-promoted National Spot Exchange Ltd (NSEL) and the NCDEX-backed NCDEX Spot Exchange (NSpot) are offering 19 agri-commodities for trading. And, it’s hardly fetching them any recognisable volume, despite over 60 per cent of the population being still dependent on agriculture. Non-agri commodities constitute almost the entire turnover of these exchanges.
Vinod Shah of Bhavesh & Co, a Vashi-based wheat trader, blames lack of transparency over the quality of products. For instance, he says, the MP Sihore variety of wheat has five different categories and the Lokwan variety has over 10 of these, with Rs 400-500 per quintal of price variation between the best and the normal quality. If the commodity sample is on your table, you can judge the quality and determine the price, which is comfortably done with arhatiyas. On the online trading platforms, however, such quality differentiators remain absent, which restrict us from taking part, Shah said.
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Mohan Gori, a Vashi-based clean pulses merchant, agrees. Other than that, the foremost hindrance is the cleaning margin. If you buy from arhatiyas, cleaning of grain is done at your own godowns, which you can comfortably pass on to consumers. But, in case of online exchanges, the cleaned commodity fetches a higher price, which benefits the sellers and not us, Gori said.
Also, arhatiyas are based next door and it is easy to catch hold of them in case of any trading difficulty. In case of online exchange, the exchange is only a trading facilitator. Buyers and sellers don’t know each other. How would you entrust crores of rupees at the hands of a person you do not know, asked Gori.
“Breaking the traditional beliefs of business transaction is a big challenge for spot exchanges. We have to give a value proposition. Otherwise, merchants will hesitate in converting. Nobody would like to come on an electronic platform until a profitable value proposition is created and exchanges are working in that direction,” said Rajesh Sinha, Head, NSpot.
But, the younger generation is interested in something other than the traditional way of business dealings; they would like to know about national and global developments, too. The general sentiment is that spot exchanges work like futures exchanges, which will be another big challenge for us to deal with, he added. The first thing spot exchanges must look at is the entry barrier. Online exchanges’ membership fee is several times more than the membership fee at the APMC market yard, of about Rs 400.
According to Anjani Sinha, MD and CEO of NSEL, the exchange is working on introducing innovative products, including tendering of grains, collateral for grains and so on, to attract extensive participation.