In an interview to Krishnamurthy Ramasubbu, joint managing director of the Multi Commodity Exchange (MCX) Lamon Rutten talks about the power of information and, MCX’s efforts and the motivation behind the recent work in delivering price information to farmers. He also categorically states that government intervention in markets is undesirable. Excerpts: • What are the rural initiatives undertaken by MCX? MCX has quite a range of initiatives; the aim is to find a sustainable way to reach to as many farmers as possible. We have tie-ups with India Posts, TERI, MSSRF and others. The TERI project for example, involved the installation of trading terminals in isolated areas. So far we have covered two villages under this project. • How many terminals and price tickers are there around the country? There are about 30,000 trading terminals and a few thousand more in rural market areas. At present, we do not have a target for putting up price tickers, but we expect to be present in most of the markets in the country. • What is the installation cost of price tickers in rural areas? It varies from place to place, depending upon the available infrastructure. Recently, we spent about 2.75 lakh on each price ticker. Though, in a large number of cases we piggyback on existing infrastructure. Why do you want farmers to ‘discover’ prices from price tickers? How does it matter to you whether farmers are getting a better price or not?It has never even come up why we are doing it. We do not consider this profit making, but just want to make it self-sustaining. As an exchange, we believe, we have a social function. If everyone has information, it levels the playing field and farmers can benefit. • How far can price discovery alone help in alleviating the information asymmetry?Price discovery is just one aspect of removing information asymmetry. When we started setting up price tickers we found that more needs to be done to enable farmers to take advantage of price information. Price ‘discovery’ makes certain things (like selling at higher prices) possible but bottlenecks still exist. They need support infrastructure like warehouses, cold chains, storage facilities, etc. This is when farmers started asking us “Can’t you do more?”. We enable seed procurement through our network. • What is the extent of price uniformity that can be achieved by price discovery?It is difficult to define the extent of price uniformity, but we have seen that there is actually more price uniformity now, compared to when the country had no futures markets. Price uniformity is good for the weaker parts of the commodity chain, which benefits producers and market efficiencies have also improved which benefits consumers. • What are the business opportunities for entrepreneurs in this system?There’re a lot of opportunities for rural entrepreneurs. They can connect to a larger market through the terminals and information kiosks. Moreover, each terminal is an employment generator. A terminal is connected to the exchange and is operated by a broker or a group of people. A number of people work under this operator, who keep the farmers abreast of the latest prices and help the broker procure from the local level. • SWOT analysis of Indian commodities markets. Strengths: a lot of hard-working people. Weaknesses: lack of support infrastructure. Opportunities: de-bottlenecking (of infrastructure) is the major opportunity. Indian farmers can compete internationally, if adequate support and infrastructure is provided. Threats: decision and policy-making needs to improve. Policies must be oriented towards enabling Indian farmers to prosper. • Your views on periodical export and trading bans on some primary commodities? Our volumes have not really gone down because of the bans but we believe markets should be allowed to operate freely. At the same time we understand that the Government has its own reasons and we have to respect government decisions.
