The working group on risk management in
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| Emerging Commodity Markets ΓΌ Commodity Derivatives markets have had along history but have been recently reintroduced in India to benefit the farmer from price discovery and to protect him from adverse price fluctuation. Through commodity markets, farmers 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. Creating conditions for rural farmers to access them is a challenge for agricultural policy planners. Some of the measures suggested to encourage the participation of farmers in the futures markets are: Encourage and allow banks, cooperative institutions, state marketing federations and Self-help Groups (SHGs), aggregators 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. Banks, warehouses, exchanges, grading agencies, aggregators, insurance companies and farmers to form CUGs (Closed User Groups, to enable a smooth process flow. Government should permit options trading. Hedging through options is considered to be more beneficial 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. Warehousing infrastructure near the production centers must be upgraded and strengthened, while grading and standardization norms also need to be reviewed and enforced. The Warehousing Development and Regulation Bill needs to be enacted without further delay. A more effective mechanism must be developed by Forward Markets Commission (FMC) to take timely measures, so that the prices are not allowed to fluctuate violently. viii Weather indices to be permitted for trading on the commodity exchange platforms. Today, indices are not permitted to be traded, as they are not considered to be commodities under the Forward Contracts Regulation Act (FCRA). 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 Ministry of Agriculture, need to be encouraged for the purpose.. Exchange terminals must be widely dispersed. Presently there are around 15,000terminals, which need to be increased manifold to enable such transactions. Government to strengthen awareness campaign across the country on the commodity markets To cope and optimize the benefits of increasing global trade, India needs to move towards freer markets in a fair multilateral trading system. Should such a system take time, the negotiation of regional FTAs could be considered, with parallel track preparedness. Domestic reforms would be the bulwark of enabling a strong presence in the global scenario for Indian agricultural products. Download 0.68 Mb. Share with your friends:
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