Financial Technologies–promoted National Spot Exchange Ltd (NSEL), India’s largest online spot commodity trading platform, has lined up plans to bridge the gap between domestic producers and overseas buyers of agri commodities. Anjani Sinha, managing director of NSEL, explains the bourse’s strategy to Dilip Kumar Jha. Edited excerpts:
How are you planning to directly link domestic farmers with global buyers of agri commodities?
NSEL is aiming to create a facility for rural and marginal farmers to sell their farm produces to us. We would process, clean, pack and sell on their behalf to overseas customers at a benchmark price displayed on our platform. Thus, farmers would be able to see the price on a terminal anywhere in the country and sell their commodity at that price. We would charge a nominal fee for processing, milling, clearing, packing and transporting the commodity to overseas buyers. The process would reduce the five-six middlemen which an agri commodity currently passes through. This would help both farmers and overseas buyers.
How will it benefit farmers?
Presently, each layer of middleman takes his/her profit before the commodity is supplied to the next level. Therefore, the price of the commodity rises exorbitantly between the farmgate and the kitchen. Hence, reduction in number of middlemen would mean fall in prices. At the same time, farmers would realise higher prices for their produce.
How does NSEL benefit from this?
NSEL will get a nominal fee for processing, milling, re-packing and delivery of farm commodities, in addition to transportation costs. In case of commodities that do not require processing, NSEL will charge an even smaller fee. In this case, even farmers would be able to sell their produce directly to overseas buyers through our platform where we will charge a marginal fee for facilitating the process as a guarantor (counterparty) for quantity and quality for buyers and payment to sellers. We will be a one-stop shop for all farm commodities.
NSEL has also launched e-platinum. How has been the response?
The spot platinum market is not currently organised in India. Availability has become an issue for investment products like coins made of platinum. Within a week of its launch, 20 kg worth of platinum was sold by multiple investors. Currently, 740,000 retail investors are on the spot exchange. Most gold and silver traders have diversified a part of their portfolio into platinum due to its potential for price appreciation.
Does that mean e-series has changed traders’ concept from an SIP kind of “accumulative investment” to a “profit-oriented” avenue?
Investors on NSEL are not speculators. Nor are they day-traders. However, that does not restrict them from looking for a profit-making avenue, rather than just keep on accumulating a particular asset class.
For example, since e-gold started in 2010, many traders have earned very good return due to the rise in prices of gold. Since launch, e-gold has given 60-70 per cent return. Similarly, looking at the potential for price rise in platinum, investors are looking at e-platinum as a major avenue for future return. This temperament of investors is not speculative in nature, it is portfolio diversification.
How do you compare the first week’s performance of the e-series precious metals contracts?
The euphoria of all e-series precious metals contracts remains intact. But, because platinum is not available in adequate spaces as in case of gold, the sentiment in platinum is slightly on the lower side. But, I am confident platinum would also catch investors’ fancy the way e-gold and e-silver have done. India’s overall import of platinum stands at between 10-15 tonnes compared to over 950 tonnes of gold.