An expert panel set up in June 2017 by the Ministry of Finance under NITI Aayog member Ramesh Chand released its ‘Report of Expert Committee on Integration of Commodity Spot and Derivatives Markets’ on April 12, 2018; it and favoured the integration of spot and derivative markets.
The report stated that a well regulated, pan-India electronic spot market converging with a functional derivatives market will benefit farmers by helping them receive better and stable prices. It also said an integration of spot and futures prices will make the commodity ecosystem more effective and connect farmers to a transparent and market-driven system of production.
According to the report, urgent adoption of the model agriculture marketing Act, proposed by the government in 2017, and promoting Farmer Producer Organisations (FPOs) to improve the bargaining power of farmers should be made. The report presented a road map for integrating spot and derivatives markets and called for urgent action to address such matters as absence of a central law to regulate a pan-India spot market, lack of adequate storage, assaying facilities and infrastructure.
As per the report, the existing spot market platforms such as the electronic National Agriculture Market (eNAM) require a robust dispute resolution mechanism. It said that a large number of participants in pan-India trading platforms like the eNAM will lead to transparent price discovery and the possibility of manipulative practices like cartelisation will also be eliminated.