The Hindu Business Line : `Foreign bodies keen to take part in commodity futures'

Mr Navin B. Chawla, Secretary, Union Department of Consumer Affairs, launching cardamom futures contract at Kochi on Wednesday. Standing beside him are (from left): Mr Kailash Gupta, Managing Director, National Multi-Commodity Exchange, Mr C.J. George, MD, Geojit, Mr P.C. Cyriac, former Chairman, Rubber Board, and Mr C.K.G. Nair, Director, Ministry of Consumer Affairs.— K.K. Mustafah

Kochi , Feb. 11

THE first cardamom futures contract in the world was launched by Mr Navin B. Chawla, Secretary in the Ministry of Consumer Affairs, Food and Public Distribution, at Kochi on Wednesday. The contract was launched on the National Multi Commodity Exchange platform on Geojit's terminal.

Addressing a press conference, Mr Chawla said a few Foreign Institutions had already evinced interest in Indian commodity futures contracts and their case would be considered at a later date. These are some of the major players in the international commodity markets.

The Foreign Institutions will enter the market only when the volumes build up in Indian commodity futures market to ensure global economies of scale, Mr Kailash Gupta, Managing Director of NMCE clarified. Their entry will ensure proper depth and volumes for Indian commodity markets.

"Trading in future contracts help to know the future prices in advance, thereby helping in taking decision and managing risks. It therefore helps all stakeholders in the commodity chain - producer, trader, exporter, importer and stockists by reducing the risks associated with uncertainty. Such markets help in smoothening the price fluctuations and thereby helping the consumers as well," Mr Chawla pointed out.

He cited the turbulence and a certain degree of volatility in Indian cardamom prices, as against the international markets. While the cardamom prices plummeted from Rs 705 in January 2003 to Rs 460 per kg in the Indian markets, the prices slipped just marginally from $ 1.5 to $9.9 in the international markets. The prices of pulses, despite having an assured MSP mechanism, have also been volatile in the upward direction.

"The localised mindset of an earlier technological era now needs to be closed and there is a need for a firewall between the exchange ownership, management and trading interests in order to promote transparency and confidence and lead to de-mutualisation in the best meaning of the term," Mr Chawla said. The single major component of the institutional structure is the exchange itself, which is the primary tier of the regulator. Reforms in the exchange have been conceived to promote efficiency, transparency and volume of trade.

Regarding the introduction of options in the commodity markets, Mr Chawla said the Bill in this regard had been approved by the Rajya Sabha, and would get the final ratification when it was passed by the Lok Sabha as well.

As online trading comes increasingly into vogue, geographical trading advantages would disappear. There is a definite role for banks in commodity exchanges and the Reserve Bank of India had now permitted the Punjab National Bank to pick up stake in NMCE, Mr Chawla said.

With the Government asking retail gold merchants to hallmark and assay their gold, around 700 retailers had come forward. They had been asked to hallmark 25 per cent of their gold by June 30, 2004, and complete their hallmarking schedule in four years time, Mr Chawla said.

The launch of cardamom futures will ensure that the geographical divide between North India and South India is bridged and that the consumers and traders have a direct and easy access with the producers and sellers from South, Mr C.J. George, Managing Director of Geojit said.

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