National Spot Exchange launches cotton contract

Written by Commodities Bureau | New Delhi | Updated: Dec 22 2008, 03:34am hrs
In a bid to ensure transparency in price discovery and quality, the National Spot Exchange (NSEL) on Saturday launched cotton contract which is expected to boost buying by traders, textile mills, importers and exporters. Titled as Nafed Contract, it would ensure that the buyers located anywhere in the country would be able to negotiate electronically on a nation wide electronic platform by NSEL.

It would also ensure that state owned National Agricultural Cooperative Marketing Federation of India (Nafed) would also able to sell cotton bales through this platform in a risk free manner. Earlier the government had directed the Cotton Corporation of India and NAFED to procure cotton from the farmers due to falling prices. Nafed has already procured 3 million quintal of cotton in Maharashtra.

The government had raised the minimum support price (MSP) for the popular medium staple variety of cotton by 40% to Rs 2,500 rupees per 100 kg for the marketing year ending September 2009. However, the prices are ruling below MSP due to record output and economic slowdown weakening the demand.We used have tenders for selling the products we procure, but this contract would resultinopen and transparent way of selling, U K.S Chauhan, managing director, Nafed told FE.

He also said that this contract would help Nafed in realizing the optimal price for cotton bales. It would provide an equal opportunity to all the mills and exporters across the country to buy Nafed cotton, Chauhan said. For this purpose, NSEL has designed 11 contracts for cotton deliverable at specific locations in Maharashtra region. The minimum lot size is 100 Bales. The NSEL would establish warehouse at Nagpur, Dhulia, Wani, Aurangabad, Amravati, Parli, Yeoatmal, Parbani, Akola, Nanded and Jalgaon delivery based spot contracts, a NSEL statement said.