After a delay of more than two years, the National Spot Exchange (NSEL) has drawn up plans to focus on five states initially to start online spot trading in agri commodities. The five states are Gujarat, Maharashtra, Karnataka, Rajasthan and Madhya Pradesh.
NSEL is hopeful of operationalising the electronic platform for spot trading in agri commodities in August this year.
NSEL has already received licences from the governments of Gujarat, Maharashtra and Karnataka. It has also entered into memoranda of understanding (MoUs) with Rajasthan and Madhya Pradesh goverments.
"We are expecting a go-ahead from Rajasthan and Madhya Pradesh soon. Initially, we will focus on these five states and later on expand our presence to other states," NSEL MD and CEO Anjani Sinha told reporters in Ahmedabad, announcing the tie-up between NSEL and Gujarat
Agro Industries Corporation (GAIC), a Gujarat government entity. NSEL is like an APMC, but unlike the latter, it will not be owned by the government and will work on the electronic platform.
NSEL is promoted by a consortium of the Multi Commodity Exchange of India (MCX), Financial Technologies India (FTIL) and National Agricultural Cooperative Marketing Federation of India (Nafed).
At the outset, NSEL will set up 20 delivery centres in Gujarat, Maharashtra and Karnataka. Gujarat will have 12 delivery centres, where NSEL plans to start online spot trading in castor, jeera (cumin seed), cotton and sesame seed.
"NSEL will launch contracts for trading in agri commodities initially and then it will look at bullion, ferrous and non-ferrous metals as well as crude oil and other commodities," he added.
Sinha also made it clear that as of now NSEL did not have any plans to starting trading in perishable commodities. After putting required infrastructure in place, as well as some trial runs and mock-trading, NSEL expects to go live by August.
Explaining the entire gamut of electronic platform for trading of agriculture commodities, Sinha added that the exchange would be completely delivery-based. NSEL will provide an electronic platform, where farmers, traders, corporate entities, processors and importers can sell and buy at the best possible and competitive rates.
NSEL's spot exchange will have specific, location-based contracts such as Jeera-Unjha contract, Castor-Mehsana or -Deesa contract or Surendranagar-Cotton contract. Each contract will be displayed on the terminals with price quotes so that buyers can choose the best deal. Buyer and sellers will have to deliver and lift the commodity at the delivery point specified in the contract.
For example, Jeera-Unjha will have a delivery centre in Unjha, north Gujarat. It will be the responsibility of sellers to deliver the material at the specified location. Similarly, buyers will have to lift the material from the same delivery point. The delivery will be both in physical and demat forms.
"After delivering the material to NSEL's specific warehouse at the delivery centre, the quality of the material will be checked according to the contract specifications notified by NSEL and if the material delivered is accepted at the warehouse, the seller will be issued warehouse receipts," he added.
NSEL will collect payment from the buying member through electronic debit and it will endorse warehouse receipts in favour of the buyer and credit the sale proceeds into the account of the seller. The transaction will be done electronically and no cheques will be allowed, Sinha made it clear.
As far as the settlement is concerned, the time for settlement of contracts will vary from commodity to commodity. "For agri commodities, the settlement period could be T+3, T+4 or more days, depending upon the time lag involved in the quality check," Sinha said.
Besides, members and brokers trading on the NSEL platform will not have to obtain APMCE licences to trade in agri commodities.
"However, buyers such as corporate houses, exporters or traders will have to pay applicable taxes, including interstate taxes such as central sales tax, and the responsibility to transport the material from the delivery point will be on the buyers," he explained. However, farmers will not be charged any taxes for selling the material, but traders will have to pay the applicable tax.
