For the first time in the country, leading commodity exchange NCDEX is set to launch a pan-India forward contract on its electronic platform starting Thursday for facilitating trade between Farmer Producer Organisations (FPOs) and bulk buyers of agricultural commodities.

Titled ‘Agrim Sauda’, the contract would allow farmers and processors, exporters, traders and other agri value chain members, a NCDEX statement on Wednesday stated.

To begin with, the forward contract would be offered for sugar and maize and will be extended to other commodities in the next months.

“Agrim Sauda will help increase the geographic reach of buyers and sellers who initially had to incur huge transaction cost. With this, a buyer or a seller from one part of the country has the benefit of being able to buy or sell any commodity in any other part of the country,” the exchange statement noted.

Unlike the futures contracts wherein the contract specifications are standardised, the forward contracts will allow trading parties to negotiate issue such as quantity and quality of the specified commodity, date, place of delivery and settlement price.

NCDEX also said the government procurement agencies can benefit from this segment. “By making price predictability less onerous it is also likely to contribute in the development of storage infrastructure for traded commodities in and around its major producing and trading areas,” Samir Shah, managing director, NCDEX, said.

Shah said, “India needs well-functioning agricultural markets where rising incomes improve the lives of millions of farmers and high quality food can reach 1.25 billion consumers, thereby becoming an integral part of inclusive growth transformation.”

Meanwhile, Small Farmers’ Agribusiness Consortium (SFAC), which is setting up the first Kisan Mandi in the next couple of months in Delhi, has envisaged interest in participating in the NCDEX platform for sourcing various commodities

“We will definitely evaluate the forward contract model and will ask some of the FPOs to participate in the electronic platform for expanding their base,” Parvesh Sharma, managing director, SFAC, told FE .

To sell their produce through these new kisan mandis, the farmers won’t have to pay the agents’ commission of 6% right now in the Delhi APMC market and the mandi tax of 1%. As a result, fruit and vegetable prices will drop by 20-25%.

Farmers can showcase their produce in these mandis, which will be directly delivered to bulk consumers like resident welfare associations and corporate retailers and hotels, Sharma noted. (Financial Express)