Commodity exchange
The National Stock Exchange's proposal to set up a commodity exchange on the lines of the Chicago Board of Trade, is a welcome move. The present problem with commodity trading in the country is that it is not centralised. If someone based in Delhi wants to trade in pepper, he should have links with Cochin.The same can be said about other commodities like cotton, jute, turmeric and coffee. Common sense demands that this state of affairs should be speedily rectified. Is trading in shares of a company having a registered office in Sangli allowed only there? More than anybody else, the proposed move will help farmers as it will do away with the high margins commanded by middlemen. With NSE having a strong presence in 161 cities across the country, reach would not be a problem. The ideal example is wheat trading in Punjab. Farmers hardly benefit because of higher prices. Agro-based industries -- sugar, cotton and tobacco for example -- will have a better idea about the crop and the prices. The scrip
movement of commodity-based companies will be determined by the movement on the commodities exchange and stocks in warehouses. The cost of setting up warehouses will have to be borne by the exchange and can be built-in into membership fees. Another advantage is that the quotes will be based on the quality of the products and trades will be transparent. With easy access to commodity trading, the volumes should get a major boost, giving depth to the market. Bank finance can also be made easy for traders. The scheme will of course require government approval. But considering that the biggest vote bank -- farmers -- will be a major beneficiary, there is no reason as to why the proposal will not sail through.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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