The National Commodity and Derivatives Exchange (NCDEX) today said it has offered Farmer Producer Organisations (FPOs) to deposit their produce in exchange approved warehouses, immediately after taking a sell position on the exchange platform. This facility known as the ‘Early pay in facility’, will help bring down the cost of hedging for farmers, who will be exempted from all applicable margins, except mark- to-market margins, to the extent of the short open position or the early pay-in position, whichever is less, NCDEX said in a release issued here.
The quality of the goods deposited in the exchange approved warehouses will need to conform to contract specifications of NCDEX, it added.
This facility, available from March 1, 2017, can be availed by the FPOs, at any time after the start of trading in a particular contract, instead of the existing norms, which allow early pay-in after the commencement of the near month period in the contract. “By making market access easier and simpler, more farmers can be encouraged to formal, regulated, cash-less markets. Over 25,000 small and marginal farmers have successfully hedged their crops on NCDEX in the last 10 months through thirteen FPOs. By creating the right mechanisms, more such companies can be persuaded to lock in prices and cover their risks on exchanges,” NCDEX Managing Director and CEO Samir Shah said.
Members will be required to inform the Exchange details of clients under FPO category to claim the benefit of ‘Early pay-in’ facility. In case of compulsory delivery and seller’s option contracts, delivery to the extent of open position at the expiry of the contract shall be mandatory after claiming early pay-in facility on the position, the release added.