Food Minister, K.V. Thomas, called on the commodity exchanges to help farmers, who lack necessary expertise, to trade on futures platforms for managing price risks.

"Adequate knowledge on futures prices helps the farmers in taking pre-sowing and post harvest decisions and the knowledge of futures prices increases his bargaining power vis-à-vis the traders,” Thomas said releasing a book “A Million Jobs and A Million More Opportunities” on Thursday night.

The book, a special study conducted by Tata Institute of Social Science (TISS) in association with Multi Commodity Exchange of India (MCX), highlights the contribution of the commodity exchange ecosystem on economic development.

Inclusive growth

Thomas said the increased participation of producers, consumers and others with exposure to physical commodity market will enhance the price discovery process. He further emphasised that the commodity derivatives market, unlike other financial markets, touches the lives of all citizens of the country, either as producers or as consumers.

The food minister said policy research and impact studies such as the one attempted jointly by the TISS and MCX, will bring to light the contribution of commodity markets in achieving the inclusive growth and the country’s social economic development.

The annual turnover of the commodity exchanges currently stands at Rs 1.4 lakh crore and is estimated to grow multi-fold with the introduction of futures trading. “It is expected that the commodity market’s annual turnover is estimated to be around Rs 55 lakh crore by 2015,” he said.

Spot exchanges

Thomas said the spot exchanges are helpful for farmers to sell their small lots and cited the example of Kerala, where rubber growers benefited to a large extent in realising over 90 per cent of the final price through participating in the futures market.

“It cannot, however, be denied that there are certain reservations and suspicions on the role of commodity exchanges as being contributory to price situation,” Thomas said.

However, the stated position of the Government is that an apparent connection between the futures trading and the rise in inflation could not be established. He assured that the Government is open to the concept of commodities exchange and futures trading as a major economic activity in tune with international market integration.

Biggest revolution

Thomas further said that exchanges have to be extremely sensitive to the complaints emanating from various parts of the country, especially from certain sections of the farming community. “It is the endeavour of the Government and the Forward Markets Commission to increase the participation of farmers and the other physical market participants in futures market for price risk management”

Jignesh Shah, Vice Chairman, MCX said the creation of commodity exchange infrastructure in the post-liberalisation phase is the biggest revolution in India.

Unlike telecom and automobile sector, where the international companies have played a major role in the growth, the commodity exchange infrastructure was created by the domestic companies without any tax exemptions or grants. The commodity exchanges have the potential to create 5 million jobs in the years to come, he said.

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