Commodities value chain to see investment of Rs 25,000 cr

The entire value chain of the country's commodities markets is likely to see a total investment of Rs 25,000 crore in the next five years on growing food security concerns.

Since the launch of commodities futures markets, the commodity value chains has seen a total investment of Rs 2,000 crore in the last four years. The value chains include warehousing, transportation, handling, quality testing, spot market, banking, training, etc.

"India will attract more overseas investment because of business transparency and approximately 99 per cent price co-relation with global futures markets. Past experiences show that prices in Indian commodities exchanges have bearing on global exchanges and vice-a-versa," said Joseph Massey, deputy managing director of the Multi Commodity Exchange, on the sidelines of a seminar on Monday.

New risk management instruments such as options and exchanges of futures for physicals (EFPs) will bring in further transparency in the market. Under EFP trading system, the buyer or the seller may exchange a futures position for a physical position of equal quantity by submitting a notice to the exchange.

Mutual funds, foreign institutional investors, large corporates and pension funds, which are currently missing from the commodities markets, may also get their share of action in the years to come.

Massey said that trading in non-tangible commodities such as rainfall, temperature, shipping freight and road freight might also find its way into exchanges, but not without necessary amendments in the APMC Act and the parallel electronic spot exchanges in place.