Farmers may have better options

PUNE: The NCDEX is ready to provide farmers the facility of ���options���, once Parliament approves changes in the Securities Contract Regulation. The new instrument will give farmers the right, though not the obligation, to review a contract at the time of maturity.

Currently, commodity exchanges can offer only futures for trading. The government has been planning to amend the SCR Act to allow options in commodity markets. However, a consensus is yet to be reached yet as Left parties are opposing the move. Expectations are that the bill would be taken up in the Budget session.

���Futures trading with options will actually help set right market distortions in the form of a minimum support price (MSP) programme of the government. Most farmers tend to grow rice and wheat mainly because of the assured price being offered to them. They should move to oilseeds and pulses where the realisations are better due to short supply conditions. This can be done if the MSP programme is pruned and options are introduced,��� said PH Ravikumar, MD& CEO, NCDEX.

In one of their cotton pilots, it was found that farmers were enthused by the concept of selling forward their produce after sowing. At the same time, they were also keen on realising a better than contracted price at the time of harvest, if market conditions were favourable.

The introduction of options will need a change in the existing regulations and the market is hopeful that options would be allowed soon so that farmers can derive the benefit by paying a small premium on the instrument, said Mr Ravikumar.

The standing committee of Parliament has given its go-ahead for some amendments to the FCR Act 1952. The most important change is to grant regulatory status to the Forward Markets Commission.

Some of the other major reform measures proposed for the commodity markets include making warehouse receipts a negotiable instrument, giving recognition to warehouse receipts under the Depository Act, encouraging private entrepreneurs to set up state of the art warehouses and revising the assaying standards.

In his address at the National Symposium on Farm Credit for Inclusive Growth, organised by the College of Agricultural Banking and Nabard last week, Mr Revikumar said that banks and insurance companies could play a major role in logistics development, particularly in warehousing.