Kolkata: The Indian Commodity Exchange ( ICEX ) has received approval from the Securities & Exchange Board of India to launch basmati paddy 1121 contracts. The exchange may launch the contract in May, with delivery in June.“The economic utility of this product is very high to the rice-processing trade like millers and tillers and exporters. They usually have a holding period of five months to a year for basmati rice and any price volatility impacts them badly,” Sanjit Prasad, managing director of ICEX, told ET.“This variety of rice is not covered under the minimum support price. Hence, an electronic trading platform lends itself to a fair and transparent price-discovery process, keeping in mind the demand and supply forces of the commodity. The commodity exhibits very high price volatility, up to 70 per cent, annually.” Iran is the largest buyer of the basmati 1121 variety from India.“We have seen that sudden policy changes of the US regarding Iran made this commodity vulnerable to volatility, putting the rice processing and exporting industry to huge risk. With the introduction of futures contracts, the trade will be able to hedge the risk,” said Prasad, chief executive of ICEX. Domestic consumption of this commodity is also witnessing high growth. The exchange has been working on this for over a year and has been in touch with several market participants to understand the contours of the contract.The physical market size of basmati paddy 1121 is around 10 million tonnes and the estimated value is about +36,000 crore. The delivery centre is Karnal, Prasad said. ICEX expects 1 per cent of the Rs 36,000-crore physical market to use the price hedging on its platform in the first year. The basmati rice industry is on the verge of clocking its highest-ever exports of Rs 30,000 crore in fiscal 2019.