FMC may allow aggregators to hedge risks for farmers

The Forward Markets Commission (FMC) is likely to allow aggregators to hedge commodity risks on behalf of farmers.

Aggregators (banks, non-governmental organisations and institutions) will be allowed to collect commodities from farmers and keep them in possession till the decision for selling is made.

Besides, if farmers want to invest in other commodities which the aggregators do not possess, they will have the liberty to do so. The aggregators will act on farmers' behalf and pass on profits and losses according to commodities' performance on the exchanges.

"We are considering the proposal of the National Commodity and Derivatives Exchange (NCDEX) as the regulator's main objective is to involve maximum number of farmers in commodities' trade," said Anupam Mishra, director.

"We discussed the NCDEX proposal at our recent meeting and gave them some suggestions. We are awaiting their response," Mishra added.

About the similarities between mutual funds and aggregators, Mishra said the former aimed at profit-making while the latter was likely to play a role of a facilitator. The mutual funds declare their investment intentions before collecting fund, while the aggregators will have the liberty to make their investment decisions according to the market sentiments. If permitted, this would be the first of its kind of collective participation in commodities trade before banks, mutual funds and financial institutions are allowed.

The involvement of these institutions is under consideration with the ministry and likely to be cleared with the amendment of FC(R)A in the forthcoming session of the Parliament.