Delivery at commodity exchanges needs improvement

NEW DELHI: Commodity exchanges need to focus more on improving the performance level in physical deliveries and ensure quality assurance of the items put on the futures platform.

"Smoothening of the physical delivery system is a problem faced by the commodities market," minister of state for food and consumer affairs, Akhilesh Prasad Singh said at the second annual commodities conference, organised by ASSOCHAM in New Delhi.

He said there is an urgent need to have a stable delivery mechanism for production in the commodities exchanges even though global figures show not more than one per cent of the contracts result in physical delivery.

Ensuring quality would be another major challenge besides the problem of smooth physical delivery, Singh said, "quality assurance lends credibility and confidence to participants in the commodity market exchange." The Minister also termed providing infrastructural base a "big challenge" which needs to be addressed for enabling the Indian commodity market to emerge as a global power.

He said volatile price fluctuations at the commodities exchanges would only fuel speculation leading to distortion and manipulation of agricultural products.

Price manipulation of agricultural products need to be guarded against, he added. During 2005-06, the total value of commodities futures trade stood at Rs 21.34 lakh crore as compared to Rs 5.71 lakh crore during 2004-05 and Rs 66,500 crore in 2002-03.