The working group on risk management in
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| 7.5. Recommendations Since farmers have no control, over the prices they receive for their crops, they can hedge by taking a position in the futures market and insure against adverse fluctuations in prices in the physical market. However, due to the predominance of small and marginal farmers, lack of awareness and other restrictions, so far there is a negligible participation of Indian farmers in the commodity futures market. The following measures are suggested to encourage the participation of farmers in the futures markets for the purpose of hedging Encourage aggregators to work for the benefit of small and marginal farmers. The banking and cooperative institutions and farmers SHGs, could play this role and hedge in the futures market, on the line of mutual funds in capital markets. Aggregators can hedge on behalf of the farmers in the futures market, as they have the requisite knowledge and operational skills needed to participate in the futures market The Government should permit options trading. Hedging through options is considered to be more convenient to farmers, as compared to futures. Options involve onetime premium payment, and farmers can gain, if prices move upwards while in a situation of downward moving prices, they are protected against losses In order to generate awareness and sensitize the farming community about the benefits and operational issues of commodity futures trading, the Government should strengthen awareness campaigns across the country To benefit farmers from the futures market, warehousing infrastructure near the production centers must be upgraded and strengthened. Grading and standardization norms also need to be reviewed and enforced. Negotiability of the warehouse receipt has to be backed by an Act. Therefore, the Warehousing Development and Regulation Bill, 2005 needs to be enacted without further delay A more effective mechanism must be developed by FMC to take timely measures, so that the prices are not allowed to fluctuate violently, leading to unreasonable spreads between producers and consumers. Stations can be positioned at commodity specific locations, so that data- requirement of the insurance companies can be met, to facilitate the automatic settlement of insurance claims against crop failures. Farmers under special schemes such as watershed development programs, DPAP, DPIP, where farmers federate as self-help-groups or common-interest-groups with the help of government agencies or NGOs, can be provided access to commodity exchanges. State Cooperative Marketing Federations, can play an important role in aggregating farmers produce and taking informed decision on commodity exchanges APMC laws to be suitably amended, to allow private players to setup e-mandis, and to permit competition amongst the existing mandis. This would bring better processes, transparency and benefits to farmers Price information should be made available at all places accessible to farmers. The Plan should make allocation for such electronic ticker boards in villages in a phased manner. Greater use of the agri-networks and call centers established by the DAC, need to be fostered, through greater awareness. Public private partnerships may also be considered, involving private players, assisting in reduction of governmental costs in this regard. The use of e-governance kiosks at subsidized rates, co funded by private and public sponsors could provide a very viable and sustainable mechanism Exchange terminals must be widely dispersed. Presently there are around 15,000terminals, which need to be increased manifold to enable such transactions. |