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Pratim Ranjan Bose

While none of the commodity exchange has so far projected a clear picture of the proposed spot agri-commodity markets, preliminary information suggests that participation in spot trading would involve far more complicated procedures than the futures market.

Agriculture being on the concurrent list and each State having its own Agriculture Produce Marketing Act (APMC), the complications will necessarily evolve in the delivery, which is part and parcel of the spot trade.

According to a senior official of West Bengal State Marketing Board - the State APMC authority - not merely the exchanges but each participant in the proposed spot market has to take licence from the respective APMC markets within the State to complete the transaction.

West Bengal has 46 APMC markets. Farmers falling under the jurisdiction of each market are legally bound to sell their produce at the local APMC.

Accordingly, if a market participant wants to participate in all the trading centres, he\she has to take licence from each local authority to take delivery.

"Even in the proposed model APMC Act does not have a provision for a centralised APMC license in each State," he says. Incidentally, States have no legal obligation to follow the model APMC act. The existing legal structure makes it imminent that each participant would focus on a limited number of markets within each State, says a prominent commodity broker.

Does it mean that the existing legal structure will come in the way of farmer benefiting from competitive interests?

A broker disagrees. "The proposed exchanges will infuse fresh competition (in however limited way it may be), in agri-market now controlled by the local `kuchha aratias' and `pukka aratias' who do not even guarantee payments. What is more important, spot exchanges add credibility to the spot market prices," he says.

According to the State APMC official, "the imminent benefits to farmers are: guaranteed payment and that too, at the negotiated price".

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