Integrate spot, derivative markets to ensure better prices for farmers: Panel

The committee chaired by NITI Aayog member Ramesh Chand was set up by the finance ministry in June last year. Photo: Hemant Mishra/Mint

New Delhi: A well regulated, pan-India electronic spot market converging with a functional derivatives market will help farmers receive better and stable prices, an expert panel set up by the finance ministry has said.

Such a convergence of spot and futures prices will also enhance the effectiveness of the commodity ecosystem and connect farmers to a transparent market-driven production system, said the ‘Report of Expert Committee on Integration of Commodity Spot and Derivatives Markets’ released on Thursday.

The committee chaired by NITI Aayog member Ramesh Chand was set up by the finance ministry in June last year. Absence of a central law to regulate a pan-India spot market, lack of adequate storage, infrastructure and assaying facilities are challenges waiting to be addressed, the report said.

Providing a road map for integrating spot and derivatives markets, the report recommended urgent adoption of the model agriculture marketing Act (proposed by the centre last year) and promoting farmer producer organizations (FPOs) to improve farmers’ bargaining power. For developing a robust derivatives market in farm produce, the government should desist from imposing sudden restrictions due to production or price fluctuations, the report said.

The panel observed that existing spot market platforms like the electronic National Agriculture Market (eNAM) need a robust dispute-resolution mechanism. A large number of participants in pan-India trading platforms like the eNAM will lead to transparent price discovery and eliminate the possibility of manipulative practices like cartelization, it said.