New Delhi: The government’s insistence on making delivery compulsory at the proposed electronic spot exchange, planned by Multi Commodity Exchange (MCX), is the main reason for delay behind its launch.
“After the Agricultural Produce Marketing Committee Act was amended in many states, there is no hurdle in launching spot exchange,” Consumer Affairs Secretary Yashwant Bhave said.
The commodity exchanges want traders to be allowed to sell products once bought from farmers or traders on the spot exchange without receiving physical delivery, which the government considers as futures trading, sources said.
“Before launching the spot exchange we would like to have a full proof legal framework, maybe a regulation can be considered by the government,” MCX promoted National Spot Exchange for Agricultural Produce (NSEAP) managing director Anjani Sinha said.
He said the exchange should not face problems once launched at the national level as agriculture is a state subject. However, he added there was no need for any new regulation.
On the other hand, leading agri commodity exchange National Commodity and Derivatives Exchange Ltd (NCDEX) managing director P H Ravikumar said the delay in setting up spot exchanges was due to certain amendments required in state laws.
When state Agricultural Produce Marketing Committee (APMC) Acts were enacted there was no provision for electronic trading platform. This was being incorporated in the APMC Acts through necessary amendments by state governments, he said.
The NCDEX promoted NCDEX Spot Exchange Ltd (NSEL) wants to set up the electronic platform for trading in agri products in next 2-3 months initially in Rajasthan, West Bengal and Madhya Pradesh.
“These three states have given their necessary approvals. We are just discussing some terms of these approvals to launch spot exchanges,” Ravikumar said.
MCX had planned to launch its spot exchange NSEAP in a phased manner from January this year starting with Gujarat, West Bengal and Kerala in the first phase and was to be followed in Rajasthan, Madhya Pradesh and Maharashtra in the next phase.
Small farmers can sell their produce in the spot exchange as the minimum trading quantity has been kept at 100 kg per product while in futures market the trade is in terms of tonnes, the NSEAP MD said.
Sinha said infrastructure including warehouses would not be a problem as the company hopes to take on lease existing warehouses besides undertaking construction of new ones.
It is also said NSEAP waits for amendments in the Forward Contract Regulation Act (FCRA) of 1952 and passage of the Warehouse Receipt Bill to establish its spot exchanges.
Government wants to move cautiously on the spot exchange issue following widespread opposition to futures trading which is considered by many political parties as the main reason for price rise of essential commodities, sources said.
“Let them first bring credibility in the futures market, then government can consider their demand on spot exchange regulation,” an official said requesting anonymity.
Meanwhile, some top level executives of NSEAP last week made a presentation before the consumer affairs secretary about their proposed spot exchange.