The National Commodity and Derivatives Exchange Ltd (NCDEX) on Sunday unveiled India's first agri-commodity options in guar seed designed as a hedge for farmers to safeguard against price risks.
The agri-options trading has been launched here by Finance Minister Arun Jaitley at a time when data shows a dip in agriculture growth and the sector is under stress.
Lauding farmers for taking the country out from a situation of shortages in the past, Jaitley, who sounded the opening gong for guar seed trading, said the NCDEX initiative will help farmers get more income from produce.
"This is one of the biggest developments for our agriculture market... Farmers will have the option to trade with this financial instrument," Jaitley said.
"We come from an age of shortages, a situation which the farmer has changed. That benefits of development should go to farmers is a priority for the country," he added.
In a video address broadcast at the event, Commerce Minister Suresh Prabhu said the initiative would enable farmers to get better prices for produce and also make it available for consumers at affordable rates.
"So there should a transparent mechanism for trading and the farmer should be able to sell produce in any part of the country," he said.
Options are trading derivatives which give the buyer a right, but not the obligation, to buy or sell a security or other financial asset at a specific price on or before a certain date.
"Options will protect farmers from downward price movement as well as give them an opportunity to sell their produce at higher prices in case of price increase," according to NCDEX Chief Executive Samir Shah.
The exchange said in a statement that a large number of informal trading centres in some communities of Rajasthan already practice some form of informal options trading while the guar seed is one of the most liquid contracts on the NCDEX platform.
NCDEX is the second exchange after MCX to launch option trading in commodities following markets regulator Securities and Exchange Board of India's (SEBI) approval for such trade last year.
There are already 59 Farmer Producer Organisations (FPOs) trading on the NCDEX, the exchange said.