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M.R. Subramani
Suresh Iyengar

NCDEX, MCX await amendment of APMC Act

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Chennai/Mumbai Feb. 12 Plans to launch spot agri-commodity exchanges by the Mumbai-based multi-commodity exchanges, NCDEX and MCX, have run into problems. A start to the exchanges now awaits changes in the Agricultural Produce Marketing Committee (APMC) Act in West Bengal and Rajasthan.

Bourses' plans

NCDEX Spot Exchange Ltd (NSEL), an arm of the National Commodity and Derivatives Exchange, had received approval from Rajasthan and West Bengal Governments to launch spot exchanges. The National Spot Exchange for Agricultural Produce (NSEAP), an arm of the Multi Commodity Exchange and its promoter Financial Technologies, was planning a simultaneous roll out of such exchanges in Gujarat, West Bengal and Kerala.

"We have asked for some changes in the terms of approval from Rajasthan and West Bengal Governments for launching the spot exchanges," Mr P.H. Ravikumar, Managing Director of NCDEX, told Business Line.

Problems

Asked on what changes had been sought, he said it was specifically with regard to the APMC Act.

NCDEX was asked by the Rajasthan Government, where it was slated to launch the spot exchange, to register with the Agricultural Produce Marketing Committees (APMCs). "The problem is that there are 120 APMCs in Rajasthan and West Bengal. It is not practically possible to register with all these," Mr Ravikumar said.

"We consider ourselves to be another APMC and therefore, we have taken up the issue with the State Governments. We hope it will be done soon," he said.

On the other hand, MCX, besides looking forward to amendments in the APMC Act, is also looking at changes to the Forward Contract Regulation Act, 1952 and passing of the Warehouse Receipts Bill by Parliament.

Electronic exchanges

It is understood that until these changes are made, MCX may not plan to launch the spot exchanges, which in the second phase was to be launched in Rajasthan, Madhya Pradesh and Maharashtra.

The problem with registering with APMCs is that these commodity exchanges are set to launch the spot markets electronically, while the agricultural markets are still functioning in the traditional way.

Two, the commodity exchanges are keen to function as the futures or stock exchanges, which function between 10 a.m. and 3 p.m. "If we decide to register with the APMCs at all, then we have to function in accordance to their timing. That will mean, even starting at 12 p.m. when most of the APMCs begin," said an NCDEX official.

Incentives

According to trade sources, only 12 States have so far agreed to change the APMC Act in tune with the current needs. Of these, only eight have changed them. The Centre, on its part, has come up with an incentive for amending the APMC Act. It has said States changing the Act would get preference for funding for their horticulture sector.

Officials of the commodity exchanges say by enlisting with APMCs, their exchanges could lose out on efficiency. Also, transparency, which is the USP of these exchanges, could be affected, they say.

`Total overhaul needed'

"We need a total overhaul of various Acts that govern functioning of agricultural markets. We are now into electronic trading. It has to be facilitated," an analyst said.

NCDEX has identified eight commodities for trading. They are: Mustard, cotton, soyabean, wheat and guarseed, rice, jute and potato.

MCX, on the other hand, has short-listed groundnut oil, cottonseed oil, cottonseed, soyabean and soyabean oil, guarseed, mustard, potato, cotton, rubber and spices.

NCDEX and MCX have also enlisted warehouses for the purpose of spot trading.

More Stories on : Commodity Exchanges | Outlook

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