The Hindu Business Line : NCDEX plans to set up mandis for spot trading

Advantages
If a person in Chennai finds the price of a commodity cheaper in Rajasthan, he can buy it online from the Rajasthan mandi and get the delivery from an NCDEX affiliated local warehouse.

SET FOR MAKEOVER?: Will these mandis such as the Chawni market in Indore undergo changes to accommodate modern facilities?

Chennai , Aug. 20

The National Commodity & Derivatives Exchange (NCDEX) intends to set up mandis across the country as it is keen to enter the spot market in commodities.

For starters, having obtained approvals from the Rajasthan and West Bengal Governments, the exchange will set up mandis in the two States, Mr P.H. Ravikumar, Managing Director & CEO, NCDEX, told Business Line.

(The National Multi-Commodity Exchange of India (NMCE) has also announced that it would start an e-platform for spot trading in commodities in Rajasthan and Gujarat.)

Sophistication

The mandis will have a high degree of sophistication. For example, if a person in Chennai finds the price of a commodity cheaper in Rajasthan, he can buy it online from the Rajasthan mandi and get the delivery from an NCDEX-affiliated local warehouse, Mr Ravikumar said.

But the bigger advantage is that the farmer will be able to get an idea of the ruling prices before he takes the produce to the mandi. Today, a farmer may have to cart his produce all the way to a nearby mandi, which could be some 30 km away. So, the chances of his taking it back home if the prices are down are small.

Benchmark likely

The NCDEX mandi, wired up to the local panchayats, will be able to inform the farmers of the ruling prices in advance.

The exchange intends to set up a benchmark in mandis so that all of them are upgraded eventually, Mr Ravikumar said.

At present, participants in the commodity exchanges can only operate in the futures market, unlike the stock exchanges where one can trade in spot, futures, options and indices.

The Forward Contracts (Regulation) Bill, 2006, which is awaiting Parliament nod, seeks to enable options and index products to be traded on the exchange. Mr Ravikumar said the commodity markets were set to explode. Today, even when a number of players in the financial sector — banks, mutual funds, financial institutions and FIIs — are barred from trading in commodity exchanges, the value of daily trade in these exchanges (about Rs 15,000 crore) is about 80 per cent of the comparable futures segment in stock exchanges. He said he expected FIIs to be allowed to play in the commodity exchanges by the year-end.

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