The Hindu Business Line : NCDEX gets nod for spot trading in Rajasthan, Bengal

What's cooking
Mustard, cotton, soya, wheat, guar identified for trading in Rajasthan; rice, jute, potato in Bengal.

Creating adequate delivery infrastructure key to the roll out.

Kolkata , Nov. 19

NCDEX Spot Exchange Ltd (NSEL) - a wholly owned subsidiary of National Commodity and Derivatives Exchange (NCDEX) - has received approval from Rajasthan and West Bengal governments for launching spot agri-commodity exchange.

A total of eight commodities have been identified for trading in both the States. This includes, mustard, cotton, soya, wheat and guar, in Rajasthan; and rice, jute and potato in Bengal. A number of broker members have also been enlisted in both the States.

Mr P.H. Ravikumar, Managing Director of NCDEX, told Business Line that mock trading has already begun in Rajasthan through select warehouses.

Delivery logistics

"We are trying to launch the exchange in Rajasthan before December 15 subject to creation of adequate delivery infrastructure," he said. Since delivery holds the key for spot trading unlike futures exchanges, NSEL is now busy enlisting a number of warehouses across the State.

A similar exercise is also on in Bengal where launch is scheduled in the second half of January.

In case NSEL fails to create enough delivery logistics in Rajasthan before December 15, the launch will be postponed to the second half of January after `Makar Sankranti'.

According to the Indian calendars, the month of `Poush' - spreading between the second half of December and first half of January - is not considered auspicious. "Launch of the agri-commodity exchange during the period may fail to attract participation from farmers and traders in rural India," he said.

Continuous trading model

On the modalities of trading on identified commodities, Mr Ravikumar said that NSEL would largely follow a `continuous trading model' whereby spot trading will be done based on the existing contract specifications for futures trading at NCDEX. However, for grades not conforming to the said specifications, NSEL would hold electronic auction.

According to him, the combination of both the systems would help extend the reach of the proposed spot market, especially in the case of highly graded commodities such as rice. Multiplicity of grades is considered a prime reason for failure of NCDEX futures trading on rice.

Apart from Rajasthan and Bengal, NSEL is in "advanced stage" of negotiation to secure approval for launching spot trade in Maharashtra and Andhra Pradesh. Discussions are also on with Haryana, Madhya Pradesh and Punjab.