Vertical name :Commodity sector
National Commodity & Derivatives Exchange Limited (NCDEX) pledges to connect 50,000 farmers to markets in the current fiscal
India is anagricultural economy and the seventh largest agricultural exporter in the world. The advent of several innovative practices and technologies in agriculture in the past decade have led to better yields and quality of crops. With the small and marginal farmers increasingly getting more and more aware of the post-harvest marketing techniques,coupled with progressive government schemes, this highly fragmented sector is trying to find its stability amidst seasonal trends and price volatility. To address the challenge of giving Indian Agri commodities a stable and dependable environment, leading institutional players such as ICICI Bank Limited (ICICI) and The National Stock Exchange of India Limited (NSE) incorporated National Commodity & Derivatives Exchange Limited (NCDEX) on 23 April 2003. Since its inception, NCDEX has been working dedicatedly towards creating a trustworthy organization helping farmers attain better price realization for their agri-produce.
Creating the differentiator: the shift brought by NCDEX
Commodity markets, as a concept was never alien to the Indian Agri space. In the early 90s, a committee headed by Prof. K.N. Kabra recommended allowing Futures trading in 17 commodity groups. The government accepted all recommendations thus clearing the path for setting up of NCDEX. The move came at a perfect time as the country needed an effective hedging platform for its processors and producers in the very beginning of the decade, which later saw a sustained rally across the Agri-commodity classes. The exchange board has come a long way since then, connecting all stakeholders and instilling confidence in them about the commodity markets, Futures trading, and the NCDEX ecosystem. Be its logistics, warehousing or a robust trading network, everything has been created and nurtured with utmost efficacy and transparency to take care of the needs of the industry. With around-the-clock preparedness to deal with any contingency and an excellent system to protect the interests of its members, NCDEX has succeeded in establishing itself as a preeminent brand in the Agri space.
Evolving out as a blue diamond in the Commodity Exchange Industry
Prior to the emergence of NCDEX, there was no nationalized platform for agri produce trading and the agri market was fragmented and localized. The disparity in agri commodity prices leads to the exploitation of the lower strata of the supply chain- the farmers and small traders. Before discovering the price, the Exchange reaches out to the producers, end-users, and even the retail investors, at the grassroots level and brings about a price transparency in the market. The most important unique aspect of NCDEX is the group offerings of NCDEX that attempt adding value to every ton of farm produce from farm to thali (plate).Another unique aspect of the NCDEX trading system is the way trade takes place. At the Exchange, even the sellers compete to sell against each other. Every bid and ask price is thrown up under the specific rule and there is no arbitrariness allowed at any level.
NCDEX offers Futures contract in 27 Agricultural and non-agriculture commodities. The unique trading system of NCDEX also provides delivery facility across 55 delivery centers in the country apart from clearing & settlement. NCDEX has established world-class warehousing facility through the warehouses approved by it and has 2.2 million tonnes of storage capacity across the country. A major and unique contribution of NCDEX has been in setting up a delivery based Futures trading platform. NCDEX manages a network of 400+ warehouses in the country with a total capacity of almost 2 million MT.
NCDEX has also pioneered in catalyzing the development of state-of-the-art private sector warehouses in India which has helped several farmers and agribusinesses in India.
NCDEX has tried to solve the problem of fragmented farmers and spot markets innovatively by developing very robust spot price benchmarks which have become benchmarks in the Agri markets in India/ These spot benchmarks are supported by robust governance mechanisms aligned to IOSCO standards.
Milestones: Making a mark in the Commodity Exchange with infusing few firsts
- This year NCDEX reached out to over 2,75,000 farmers through 300 Farmer Producer Organizations (FPOs) across 14 states.
- 51 FPOs that represent over 46,000 farmers traded on NCDEX’ platform, with 10-15% increased realization.
- The Ministry of Agriculture and Farmers Welfare recognized a series of efforts undertaken by NCDEX, to connect farmers to derivative markets, which has resulted in better price realization for their produce.
- A Committee constituted by the Government Of India, with the mission of “Doubling farmers’ income“, has applauded NCDEX’s trading system, delivery facility, hedging and risk management options and price dissemination network.
- NCDEX is the first commodity exchange in the world, to implement Radio-frequency identification (RFID) technology in its approved warehouses. RFID ensures tracking of commodities stored in the warehouses through radio frequency signals and this real-time information helps improving the efficiency and trustworthiness of the warehouse operations. This, in turn, helps NCDEX delight its customers as customers feel an increased sense of security and confidence.
- NCDEX’s mobile application ‘NCDEX Market’ (available on all three platforms of Android, iOS, and windows) enables farmers/ market participants to book a warehouse of choice at a click of a button.
NCDEX’s Market Participants
At present, 486 Members have registered with NCDEX. Most of the industry participants either participate directly or refer to the NCDEX prices before entering into physical trades. The entire value chain in various commodity groups like pulses, food grains, edible oils and seeds, sweeteners, spices etc. participate on NCDEX at various stages of crop cycles. Food processors, FMCG giants, and suppliers hedge their commodity price risk on the exchange platform.
Amplification: NCDEX’s expansion
- NCDEX e-Markets Limited (NeML)
- NCDEX Institute of Commodity Markets and Research (NICR)
The Journey Ahead
The board aspires to continue contributing to enhancing farmer incomes through its various initiatives and products. NCDEX has recently inaugurated its promising new venture – National E-Repository Ltd. (NERL) under the aegis of the Warehousing Development and Regulatory Authority. Promoted by NCDEX, NABARD, ICICI and SBI, this new arm will provide a robust regulated institutional framework for inventory financing and electronic negotiable warehouse receipt (e-NWR) lending to meet the financial needs of those involved in the commodities business, such as farmers, traders, processors, and aggregators, transforming the way farmers and traders use warehouses as a facility. NCDEX’s primary purpose is to enable farmers to achieve higher crop yields. Smallholder farmers represent the majority of people living in absolute poverty. NCDEX takes it upon itself as its primary responsibility to enable most marginalized farmers to access reliable markets. This will have a profound impact on food security and bring NCDEX adjacent to the national goal of doubling farmer incomes by 2022.