In India, agricultural commodity futures trading has seen several crests and troughs, owing to frequent regulatory action and rapid changes in hedging. Samir Shah, who has taken charge as managing director (in charge) at National Commodity & Derivatives Exchange (NCDEX) from June, has drawn a road map to benefit not just the exchange, but the overall agricultural commodity futures segment. In an interview with Dilip Kumar Jha, he lists the exchange's priorities. Edited excerpts:
You have taken charge at NCDEX at a crucial juncture, as volumes are moderating. What are your plans?
Turnover is a very short-term focus. We have listed four major steps to re-strategise business on our exchange. My priorities would be to deepen the market, increase hedgers' participations, improve liquidity in agricultural commodities and introduce contracts for meaningful price discovery to Indian participants.
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Mandi modernisation has been a major initiative by the exchange. How is this progressing and what would be the next move in this regard?
NCDEX Spot Exchange, our group company, has already modernised 25 spot mandis in Karnataka, and the number would rise to 50-55 by October, accounting for about 50 per cent of the state's agricultural produce. This has also been extended to Andhra Pradesh. Now, the Tamil Nadu government, too, has evinced interest in this project. We are in discussions with aggregators and traders from these mandis to hedge their risks on the NCDEX platform.
Hedgers' participation in India is very low compared to other countries. How do you plan to address this?
Hedgers' participation can be gauged from open interest, or the number of open unsettled contracts. In India, this stands at a dismal 0.2 per cent of the total agricultural produce, compared with 25-30 per cent globally. Therefore, there is enough room for growth. We are trying to increase it through a focused approach. For example, we are organising a meeting of stakeholders and warehouses to improve risk handling by hedgers. We are also in talks with farmer organisations and marketing bodies to work as aggregators and trade on behalf of individual farmers.
The exchange has seen attrition at the management level. Is that a part of the overall business strategy?
Some officials had plans to pursue other interests, but they would continue to remain with us as long as the management wants. We have been making appointments for senior level postings. Our previous managing director is continuing with us as advisor. He is focusing on the mandi modernisation project.
Commodity transaction tax (CTT) has been proposed on non-agricultural commodities. How would this benefit the exchange?
We don't look at CTT as a major benefit. It would probably lead to minor benefits in the short term, owing to a small shift in trade from non-agricultural commodities to agricultural commodities. Exemption from CTT would encourage all exchanges, including NCDEX, to continue expanding the agricultural futures market, which would benefit farmers. As we expand across our product portfolio, our agri:non-agri business ratio is certain to change.