151 FPOs open trading accounts in NCDEX

Just recently Nabard (an acronym for the National Bank for Agriculture and Rural Development) decided to promote 5,000 farmer producer organisations (FPOs) in the next couple of years. This means some of them will surely translate into clients for trading platforms like NCDEX (National Commodity and Derivatives Exchange). This commodity trading platform has already managed to get 151 FPOs to open their accounts with it.

Aleen Mukherjee, Executive VicePresident, NCDEX, said, “We are expecting to add as many FPOs as possible on the platform. We have not set any targets yet.” NCDEX has been able to attract 2.15 lakh farmers from across 12 states of the country. At present, the platform is processing the opening of accounts of 170 FPOs. About 70 FPOs have already traded about 26,540 metric tonnes on the platform (since April 2016 -June 2018). Such platforms help farmers in getting a better price discovery and hence price risk management as well, said Mukherjee. Before these FPOs reach the stage of trading, they need a lot of hand holding, admits Mukherjee. On the NCDEX platform, the delivery taken currently stands at 30 metric tonnes and the turnover of the delivered quantity is worth Rs 684 lakh. Mukherjee added that derivatives market is a price risk mitigation tool and FPOs need to use the tool effectively. “There are various risks involved in agricultural produce supply chain, and using futures derivatives market helps mitigate some of the price risks.” At present, FPOs trade 16 agricultural commodities on NCDEX platform.

According to NCDEX report, 82 FPOs from Maharashtra have either traded or opened a trading account with NCDEX, followed by Rajasthan (20 FPOs), Madhya Pradesh (17 FPOs) and Gujarat (10 FPOs) among others. These FPOs which are more formal set-ups undergo training at institutions like government bodies, NGOs and so on. "Futures market provides price transparency for better decision making for the FPOs and their member farmers,” he added.

With an aim to attract more FPOs to its platform, the exchange has initiated various schemes— 50 per cent discounting on rent charges on warehousing for FPOs; and in case of deposit of goods early, the exchange will not charge the FPOs.

Talking about its warehousing needs, Mukherjee said the exchange has empanelled warehouse service providers with warehouses spread across the exchange delivery centres, NCDEX uses their services depending on the requirements of the commodity to be delivered on exchange platform.