MCX, NCDEX await nod for online spot trade

National commodity bourses "� the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchanges (NCDEX) "� are planning to launch commodity-specific electronic spot trading in mandis of different states.

For this, the comexes are awaiting clarifications from the state governments with regard to amendments in the Agricultural Produce Marketing Committee (APMC) Act.

Experts believe that by the time the respective state machinery clears the decks for spot trading, the exchanges can strengthen their membership bases.

The purpose of an electronic spot exchange is to empower farmers with decision-making capabilities by disseminating the national data electronically at the mandi.

In West Bengal, for example, the bourses are looking at "nai" (new) potato for trade on the electronic platform, while Rajasthan is eyeing guar, wheat etc.

MCX and NCDEX have proposed to flag off the spot exchanges by the end of the month. But experts believe that would have to wait till the amendment in the APMC Act was done.

"When the Act was formulated, the electronic exchange was an unknown concept and the guidelines were suitable to physical trade of goods only," said NCDEX MD P H Ravi Kumar, managing director of NCDEX.

While deferring the implementation of electronic spot trading towards the end of this month, Kumar said a fresh deadline could not be set for the spot exchange owing to unprecedented delay by the state administration.

Anjani Sinha, managing director, National Spot Exchange (formerly, National Spot Exchange for Agriculture Produce), confirmed the hurdles without elaborating much.

National spot exchanges would mark the agri independence for the country's farmers, Jignesh Shah, MD and CEO, MCX, said in a recent meeting.

MCX and NCDEX have obtained permission to launch spot exchanges in West Bengal and Rajasthan. While the former is awaiting permission from states including Kerala, Haryana, Andhra Pradesh and Maharashtra, the latter has applied for grants from Andhra Pradesh, Madhya Pradesh, Haryana, Maharashtra and Gujarat.

The biggest advantage for a farmer would be not to transport goods physically but to know the prices first and decide whether he should sell or hold.

For farmers' benefit, the spot exchange would facilitate storing of goods in exchanges and sell or buy as per price convenience.

At present, farmers transport goods to mandis several kilometres away. When a farmer finds the prevailing price in a mandi lower than the expected level, he is left with no idea but to sell at that price, as he might be incurring losses for holding goods in trucks in the form of transportation costs. In this scenario, the farmer wants to sell goods as early as possible, offering the price advantage to the buyer.

"The electronic spot exchange will save the farmer from hara-kiri and unlike futures where contracts are settled at the end of expiry of the contract, the spot exchange will offer deal-to-deal settlement," Kumar of NCDEX said. The exchange had started mock trading for the spot exchange in November last year.

Yashwant Bhave, secretary, Department of Consumer Affairs, has pressed for setting up a single regulator for spot and future exchanges. If that happens, experts believe, the country will see a commodity revolution in spot as well as derivatives with easy regulatory mechanism in place.