In a move that has the potential to create 8,000 jobs in both urban and rural areas, the National Multi Commodity Exchange has decided to start spot trading in commodities in the country.
The trading would be done through National Agriculture Produce Marketing Company. NMCE has already got the approval from the state governments of Gujarat and Rajasthan.
NMCE has applied for approval from 17 other states, which is pending. In the coming week the exchange has scheduled hearings for approval from three states.
“The price discovery mechanism for the futures trading is very flawed today and the spot trading will lead to an efficient price discovery mechanism,” said Sudip Bandyopadhyay, chief executive officer, Reliance Money and director at NMCE. Reliance Money holds 26 per cent stake in NMCE.
The spot trading would benefit farmers in a big way, he said. “Once the spot trading begins and mandi’s are electronically linked, the farmers would know the price of the fruits, vegetables or other commodities that they sell across various markets,” he said.
With roughly 150-200 mandis to a state, and “at least two employees at each mandi” — as per Bandyopadhyay — the move promises to create plenty of employment in both urban and rural areas.
The most important requirement for a spot trading is that all the mandis are electronically linked for the sake of trading and price consistency. NMCE is in the process of linking the mandis in the two states that have received the approval.
Another critical aspect is the delivery, for which warehousing is crucial. Central Warehousing Corporation (CWC) has taken a 26 per cent stake in NMCE. The company has a total of almost 2,000 warehouses across the country and thus has the ability to carry out the delivery. “Delivery is important in spot trading and CWC has the ability to service the delivery,” he said.