The commodity derivatives market regulator, Forward Markets Commission (FMC), wants the ministry of consumer affairs (MCA) to relax shareholding guidelines to allow public sector registered societies with equity shareholding in an exchange to trade on the same platform.
Currently, any shareholder, including registered societies or state marketing federations are not allowed to trade on the same exchange’s platform. Although they are free to take a membership of another exchange and trade freely there, they are apparently not interested in trading on a competing exchange.
FMC’s move will benefit these societies to act as aggregators and hedge positions on the exchange on behalf of farmers.
| PLOUGHING DREAMS Exchange-wise shareholding of farmers’ body | ||
| Name of organisation | Exchange | Shareholding (%) |
| Iffco | NCDEX | 8.88 |
| Gujarat Agro | NMCE | 5.47 |
| Nafed | NMCE | 3.92 |
| Guj State Agri Board | NMCE | <1.0 |
“We have written to the MCA to relax shareholding guidelines so that registered societies can be appointed as an aggregator by the exchange where they have equity interest,” said Ramesh Abhishek, chairman, FMC.
Registered societies like the Haryana State Cooperative Supply and Marketing Federation (Hafed), the National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) and a host of other state federations are representatives of small farmers in the country. These societies, with a membership base of lakhs of small and medium farmers, today take a trading call on behalf of their members in mandis and national spot markets. For example, Hafed has decided to trade some agri commodities on the Financial Technologies-promoted National Spot Exchange Ltd (NSEL).
But, owing to restrictions in shareholding guidelines, Hafed has failed to take contra positions in futures exchanges. Consequently, the Federation incurs one-side profit or loss depending on the demand–supply situation. Once, they are allowed to trade on the futures exchange in which they have equity stakes, they would be able to hedge commodity positions for the benefit of small and marginal farmers.
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Under the revision FMC has sought, registered societies would have to form a separate division for making a trading call and looking at risk management strategies on a day-to-day basis.
According to a Parliament standing committee report on food, consumer affairs and public distribution, small and marginal farmers have not benefited from the rapidly growing commodity futures market. It has suggested wider consultations with them.
The FMC has also asked commodity exchanges to identify at least one aggregator in two-three months, which may help a farmer to hedge his position on the exchange platform.
An aggregator could be a registered society, a non-governmental organisation and/or a producer company as defined under the Companies Act.