Date:05/11/2006 URL: http://www.thehindubusinessline.com/2006/11/05/stories/2006110502490500.htm

Back `Bring farmers under the ambit of financial inclusion'

Our Bureau

Banks, financial institutions must extend their participation in commodities mkts

Hyderabad , Nov. 4

Addressing the special session on `Markets for supporting inclusive growth', Mr Ravikumar, Chairman and Managing Director, National Commodities and Derivatives Exchange, spoke about the increasing role of commodities exchanges in providing forward market linkages and price discovery in an effort to bring the farmers under the ambit of financial inclusion.

The process would succeed if banks and exchanges worked together, he said.

Mr Ravikumar stressed on the need to separate the procurement function and fixing of the minimum support price and redefine the role of Food Corporation of India to provide active market support.

He said banks and financial institutions which have been intervening in the forex and stock markets for quite a while now need to extend their active participation in commodities markets.

On futures markets being perceived as speculative in nature, he said, "If you are ill and you put a thermometer in your mouth and it shows 102 degrees, please don't blame the thermometer for your illness. The illness is in the underlying body. It is the supply and demand mismatch which causes the price to rise."

The proposed changes to the regulatory framework governing futures trading in agri-commodities would prove largely beneficial to farmers, he added.

He said that if the amendments to the Forward Contract Regulation Act get Parliamentary approval, then options could be written in favour of farmers. This mechanism, which is currently not allowed, would help farmers in mitigating their risks and getting better realisations.

Creating awareness among the farmers is one of the key elements needed to facilitate their participation in exchanges. In this context, he urged all banks to come forward and act as purveyors of information.

In his presentation, he suggested that banks should extend more post-production credit as against the pre-production lending followed by most of them now. Quoting a finding from a study, "For every Re 1 sale of agri-commodity, the producer gets Re 0.30", he said the aim of NCDEX was to take the share of the producer to 50 per cent.