Complying with guidelines of the market regulator, the exchange is allowed to start futures trading for paddy (basmati) for a trading and delivery lot size of 10 tonne with compulsory delivery option.
Agri commodity bourse National Commodity & Derivatives Exchange announced on Tuesday that it is all set to launch futures contract for paddy (basmati) on Wednesday. Introduction of this new contract ‘Paddy (Basmati) — Pusa 1121’ will facilitate an effective risk management tool to the market participants and also provide a fair price discovery platform for highly volatile paddy, said Vijay Kumar, MD & CEO of NCDEX.
Karnal, a core trading centre of Haryana, will remain as basis delivery centre, while Sonipat will be the additional delivery centre in the state for Pusa 1121 contracts. Complying with guidelines of the market regulator, the exchange is allowed to start futures trading for paddy (basmati) for a trading and delivery lot size of 10 tonne with compulsory delivery option.
“It has been our constant endeavour to provide a stronger, broad-based product offering, which will add economic value to agri businesses. The addition of Paddy (Basmati) – Pusa 1121 futures contract to the grain product basket is aimed at offering an exhaustive and wholesome risk management offering to the market.
“We are encouraged by the continued support of the grain industry and look forward to the successful launch of the contract,” Kumar added.
The global rice production is about 501.5 million tonne. India contributes about 23% of global output with approximate production of 116 million tonne. Basmati, famous for its quality, contributes 8-9 million tonne of total global rice production.
India produces about 5.5 million tonne basmati with more than 70% share of global basmati production, while Pakistan contributes with rest of about 30% share. It is estimated that India produces about 5% basmati out of its total paddy production.
Kapil Dev, EVP-Business, NCDEX said, “Indian grain industry, which has been growing at a steady rate year-on-year, is exposed to high price risk.
“Foodgrain industry uses wheat, maize and paddy as inputs for measuring demand and supply trend of grains and any adverse price movement can erode whole profit margin. NCDEX already has wheat and maize futures on its platform. Addition of Pusa 1121 will improve decision making of the value chain.”
In order to safeguard market price risks, this hedging instrument will help commodity participants to fetch better price realisation for their grain produce, and thus will enhance their income, NCDEX sources added.