NCDEX to start onion, potato futures on Friday

The National Commodity and Derivatives Exchange (NCDEX) will start trading in onion and potato futures this Friday.

That will make onion only the second perishable commodity, after potato, whose futures contracts will be available for trading on an Indian derivatives exchange.

In March, the Multi Commodity Exchange had launched potato futures.

"Futures trading in perishable commodities such as onion and potato would ensure that in times of overproduction a support price is available to the farmers," said vice-president (products) Sanvali Kaushik.

India is the second largest producer of onion after China, with an annual production of 82 lakh tonne. The bumper production led to a fall in prices and caused monetary loss to the farmers.

There is no support price for both onion and potato in India and declining profits follow every bumper crop.

This year National Agricultural Co-operative Marketing Federation of India (Nafed) had procured 2.4 million tonne of onion at Rs 300 a quintal against the ruling market price of Rs 270 to ensure that the farmers did not suffer great losses.

As a result of this trading a new breed of investors would come and look at potato and onion trading from a different perspective. This would give a signal to farmers for crop diversification and consequently improve the eco-system, said Kaushik.

The onion and potato futures would be compulsorily delivery-based. All open position at the expiry of the contract would mean that the seller should sell and the buyer should buy. Any default would attract a penalty of 5 per cent of the final settlement price. It would be a multi-delivery location contract.

Delhi would be the basis delivery centre for potato, while Agra, Farukhabad (Uttar Pradesh) and Jalandhar would be the additional delivery centre. For onion, Lasalgaon would be the basis delivery centre, while Pimpalgaon, Delhi and Mahuva (Gujarat) would be the additional delivery centres.