In a first of its kind, ACE Commodity Exchange has introduced an option, whereby, a seller can deliver cotton from his/her own warehouse rather than moving it to the exchange-accredited warehouse.

This will be applicable for delivery centres located only in Gujarat. The change in contract specification, to be implemented from the new cotton season starting October, is expected to boost participation of traders in the value chain.

The exchange, anchored by the Kotak Group, had attracted wide participation last year as the contract specification was close to Shakar-6, a widely traded cotton variety.

Speaking to Business Line , Dilip Bhatia, Chief Executive Officer, Ace Commodity, said according to the discussion with market participants, it was found that a few ginners were reluctant to come on the trading platform due to the additional cost of six per cent incurred in moving their goods to the exchange warehouse, besides loading and unloading expenses.

“Now, we have decided to assay the cotton lying at the ginners’ warehouse and put a specially designed exchange logo on cotton bales which pass the Ace quality test,” he said.

This facility of delivery will be available only to traders who are certified by the exchange. The certification process involves the past performance of the trader, financial strength and his market integrity.

If successful, Ace plans to replicate the model for other agriculture commodities including refined soya oil.

“Agreed, we will take an additional risk of about four days between the date when the goods are marked for delivery and it is actually delivered, but we are confident that our risk will be minimised by the screening process that qualifies traders for availing this facility,” said Bhati.

The exchange has also introduced additional delivery centres at Wani and Jalna (Maharashtra), Warangal (Andhra Pradesh), Bhatinda (Punjab) and Sirsa (Haryana).

Cotton delivery at the new centres will be based on request matching. If the request for delivery at new centres does not match, then the buyer has to take delivery from Gujarat. No cash settlement will be allowed, said Bhatia.

Agreeing that the newly introduced commodity transaction tax will impact volumes, Bhatia said the exchange is making efforts to convince the Government to remove the tax on processed agriculture commodities.

suresh.iyengar@thehindu.co.in

Published on July 12, 2013