NSEL steps in to buy cotton for Nafed

MUMBAI: The National Spot Exchange (NSEL) has procured raw cotton worth Rs 30 crore on behalf of Nafed in December and January. NSEL, which is jointly promoted by Financial Technologies and National Agricultural Marketing Federation of India (Nafed), has an agreement with the government agency for procurement, and earns a 2% commission for buying on behalf of Nafed. It also undertakes the ginning and pressing of the cotton into bales.

The spot exchange has also launched pre-certified cotton bales contracts. This contract is expected to benefit importers, exporters and cotton textile mills as they will gain access to quality-assured cotton.

���Nafed also reimburses the costs involved in processing the cotton and pays the interest owed to banks,��� said NSEL���s MD and CEO Anjani Sinha. This arrangement will help Nafed to significantly reduce procurement costs, and at the same time realise an optimal price for the cotton bales. Mills, on the other hand, would have a fair opportunity to bid and purchase Nafed���s cotton, with certified quality assurance, electronically.

Nafed procures cotton worth about Rs 800 crore annually. NSEL hopes that over time, it would be able to procure more cotton on the agency���s behalf. NSEL is already operative in five states including Rajasthan, Gujarat, Maharashtra, Karnataka and Andhra Pradesh. ���We will be operative in Tamil Nadu and Madhya Pradesh in a month���s time,��� Mr Sinha said.

The exchange has active contracts in castorseed, arecanut, cotton, guar, urad, tur, gold and silver. The exchange plans to launch a jeera spot contract in Gujarat and chana and mustard seed contract in Madhya Pradesh next month. Currently, the spot exchange operates on a frugal agricultural marketing model as its main objective is to provide electronic linkages to an existing market. There is no investment in land, or private yards. ���The main costs are incurred on knowledge dissemination and manpower engagement,��� Mr Sinha said.