NCDEX Future Plan to Benefit Small and Medium Farmers

1. NCDEX mainly focuses on trading, thereby largely benefiting traders. What are you doing to make NCDEX farmer friendly?

Ans: For the last two years we at NCDEX are trying to address the issues of small and medium farmers which constitute about 89% of the total farmers’ of the country. The basic idea is that unless they produce food grains in sizable quantity and the produce is not marketed in an appropriate manner, they cannot get the right price. Therefore, there was a need to organize small, medium and marginal farmers into what is called a farmer producer organization or a company. In the process of this endeavor, we have been assisted by Tata Trust, Reliance Foundation, Gates Foundation and a number of other non-government organizations. And we have been present in seven states including Rajasthan, Madhya Pradesh, Bihar, Andhra Pradesh, Maharashtra and Gujarat.

We have been working on farmer producer companies (FPC) whose number now stands at 41 and they have been training actually in the future platform. This is an endeavor in which the NCDEX has taken lead so far as the forward market is concerned and NCDEX group companies like NCDEX e-Market Limited (NeML) which is basically trying to achieve the same objective in the spot market. As you know, NCDEX is in the future field and NeML in the spot field and another of our group companies (not technically our group company) but in which we have 49% share, ReMSL of Karnataka, is basically undertaking the Mandi modernization programmes including the farmers’ education, awareness for the e-platform. So this is how we strive to organize farmers and allow them to participate in the electronic trading system.

2. Please tell us briefly about agri-trading portfolio of NCDEX. Do you have any plan to increase it further?

Ans: Today the agri- trade is almost 90% of our total trade. Actually we don’t have that much of presence in the non-agri segment. We have small non-agri components. Basically we are an agri trade company and we have been requesting SEBI to give us more contracts particularly in areas like soya. We have already got a few and there are still to be got. Basically feed areas which we like to prosper further. So far as food is concerned there are issues of government policies and government regulations, the price goes up the government becomes rightly shows concerned about it. Our emphasis is to increase the number of contracts and cover more commodities particularly in the feed category which are basically agri-products.

3. Is NCDEX shifting its attention to spot trading?

Ans: NCDEX is not on the spot side. It is our subsidiary NeML which is on the spot side. Although on a limited scale, NeML has also made very successful interventions. For example, they organized Maize farmers in Nabarangapur in Odisha. Last year they succeeded in eliciting the support of about 50 maize farmers who traded in the electronic platform and got a price which was higher than the MSP. In Nabarangapur, farmers have not been getting MSP for the last almost 2-3 years. For that experiment we need markets, we need permissions from the state governments.

We have requested the state governments to give us some more markets. We are doing similar things in Bihar in the case of horticulture and litchi. That is spot marketing. At the moment the spot marketing initiatives are somewhat thin on the ground but we have to concentrate on that. NeML has to engage on that. In addition we have engaged another company ReMSL in Karnataka which as I have already mentioned, it is engaged in mandi modernisation, knowledge dissemination to the farmers. NEML is also employing mobile technology to make farmers more informed like telling them about the arrival prices.

4. What is option trading?

Ans: Option trading is just being permitted by the SEBI. We are working on the modality. Actually it is at our request that we have been allowed to go for option trading. Very soon we will be putting it in the public domain.

5. How is it different from future trading?

Ans: It is actually related to the future. It can be converted to one day future also. It is one form of trading. May be it will lead to consolidation of the trading. But in any case, since details are being worked out, I would not be able to say anything at this stage.

Now, NCDEX is working directly with the farmers through farmer producer organizations (FPOs). Could you please share your experience in working with farmers groups directly and how are they benefited?

Ans: We can take instances of Rajasthan and Madhya Pradesh where farmers of Soya have realized 15-25 % higher price by entering into the future trade. The advantage is that sometimes they can also hedge. The hedging is also provided. It gives protection to the farmers. Bihar for example where actually the farmers got higher price realiasation.

I am actually trying to say that apart from getting better price realization, they can utilize that extra money in modernising equipments for enhancing their agriculture income. However, this trade has to be monitored, as there is some risk involved. As a matter of fact, we are trying to make the trading risk free for the farmers so that this model can be accepted by them. We would like that the farmers themselves or the farmer producer companies themselves should participate directly. For this, some structural issues need to be addressed. This is so because today one of the requirements is that only a member can participate in the trade. A member’s minimum net worth should be Rs 50 lakhs. It is very difficult for the farmers’ cooperatives or the farmer producer organisations to have Rs 50 Lakh net worth. So we would be requesting through media that either NABARD gives some assistance to these farmer producer or cooperative organizations, so that their net worth can be increased.

6. How do you ensure fair price to farmers? How will you check hoarding and black marketing?

Ans: As far I know from my experience small, medium and marginal farmers have never been accused of hoarding. They do not hoard because they do not have the capacity to hoarding. Our emphasis is actually to tab these 98% small, medium and marginal farmers who are the majority number one, whose main problem is their stocks today are not getting aggregated, are not properly warehoused. We are trying to improving that. We want to ensure aggregation of stocks so that it becomes marketable stocks which can be marketed on the e-platforms. Before that through farmers’ education, orientation and also the active assistance of the NGOs, the quality verification, maintaining the standard of the grains have to be maintained. I do not think these lead to hoarding. When they participate, it is not really hoarding. As they are participating directly, so they actually sell at a better price.

7. How realistic is it to think of doubling farmers’ income?

Ans: A comparison of the 2003 data with 2013 of the national sample survey organization (NSSO) shows that Odisha is one state where the farmer’s income has actually doubled. There has been 1.75 times and 1.57 times increase in the farmers’ income in Madhya Pradesh and Chhattisgarh respectively. Hence going by the estimates of NSSO, it can be said that at least three states have more or less been able to double the farmers’ income. However, it must be admitted that during the period, the base was low. It was easy to double the income when the base was low. Now since the base has been increased, it is necessary that the farmers should be encouraged to generate income from alternative sources of income and from allied activities such as animal husbandry, fisheries, etc.

Goat rearing is another area where there is tremendous scope for increasing the income for the farmers. This area must be channelized. The states that present greater scope for increasing farmer’s income from the animal farming must be given priority. The second area is agriculture marketing. In most states other than Punjab, Haryana and, to some extent, Gujarat, the income from cultivation is actually very low.

For example Kerala ranks at number three in terms of agriculture income. It is because income from wages is higher and income from non-farm business is little higher. Therefore it is possible to work but that for not only agriculture market has to improve, productivity has to be improved. For the states like Odisha, Bihar and Bengal it is necessary that productivity has to be increased. Irrigation must be carried out in a proper manner and water must reach the land. The states should be conscious of this fact.

More number of farmers should participate in the trade on a sustainable basis. I am not happy today because I want farmers to participate in future platform on a sustainable basis which means the farmer producer companies which have been nurtured by the NGOs, we have to hang hold them for some more time.

We have to set up some more such farmer producer companies in other states including those where they have been able to make some impact. We also look at the quality aspect of the produce that must be enhanced, some investments must be required plus we are hoping that we will get some new contracts particularly in the feed sector like Soya. They are not food but feed. Therefore, the essentiality is not the issue for the government to take action, so that the entire agri-chain can be developed by us.

Second thing is good warehousing since NCDEX warehouses are of higher standards because our quality supervision is higher. We want good warehouses practices to be developed that also add value to agriculture produce.

8. Recently you participated in panel discussion on doubling farmers’ income in Delhi. What were the outcomes of the discussion?

Ans: Doubling the farmers’ income was one of the subjects that were discussed in the panel discussion at the Civil Service Day this year. The panel discussion was chaired by Professor Ramesh Chand of NITI Aayog and I was one of the panelists. The basic idea was to explore the possibilities in the areas that need to be intensified so that farmers’ income can be doubled by 2022.