Bonds, Currencies & Commodities
NCDEX cannot disown responsibility for delivering quality goods, says FMC
Traders are facing destruction of black pepper or kalimirchi stock, worth about Rs300 crore traded on NCDEX that was found to contain carcinogenic mineral oils
 
Pepper traders have welcomed commodity market regulator Forward Markets Commission (FMC)'s decision instructing commodity exchanges to bear the responsibility of delivering quality goods.
 
The traders were up in arms against National Commodity & Derivatives Exchange (NCDEX) over the Exchange’s disowning responsibility for destroying adulterated (containing mineral oil) stocks in the Exchange accredited warehouses.
 
“As per Forward Contract Regulation Act 1952, forward contracts in commodity markets entail that all the contracts must eventually result in delivery of the commodities. Our stand that NCDEX cannot disown responsibility for delivering quality goods is clearly vindicated with the FMC circular,” said Pradeep Acharya, vice president, Kalimirchi Vyapari Association (KVA).
 
The circular issued by S Arun Kumar, deputy director of FMC, says, “It is needless to emphasize here that the settlement of the outstanding forward contacts by way of delivery is the primary responsibility of the respective exchanges on whose platform the participants have traded in forward/ futures contracts.”
 
The traders' body had questioned NCDEX for disowning responsibility for the adulteration of ‘Malabar Garbled 1 Black Pepper’ with cancer causing mineral oils, which has been confirmed by the Food and Safety Standards Authority of India (FSSAI). 
 
Acharya recalled that FSSAI has sealed the entire stock of 7,000 tonnes of ‘Malabar Garbled 1 Black Pepper’ valued at over Rs300 crore after sample tests have confirmed the adulteration the stocks with carcinogenic mineral oils.
 
The traders, who have paid for the stocks upfront and but not been given delivery, asked for refund of their money or delivery of the commodity as per specifications.
 
NCDEX, instead, disowned any responsibility for the adulteration saying the Exchange is not liable for non-compliance by any member and market participant. NCDEX maintained that it only provides a trading platform in forward contracts, a stand that gets negated with the FMC’s latest circular. 
 
Acharya said now that the FMC has asked the exchanges to report about their existing mechanism for redressal of buyers’ grievances regarding quantity and /or quality of the goods delivered to them, the issue is crystal-clear. "The onus is certainly on NCDEX,” he said.
 
KVA has since moved Madhya Pradesh High Court seeking urgent justice as the traders’ money of over Rs300 crore has been stuck and that they are losing heavily on all fronts.
 

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Why are we self-defeatists in indigenous mass transportation?
Konkan Railway’s Sky Bus Technology was dumped on safety considerations while Mumbai Mono Rail is getting delayed due to safety concerns. Even, imported technology Monorail that costs 70% more than the Skybus, is being given preference. Why are we so defeatists towards not adopting Indian innovations?
 
Engineering innovations such as Konkan Railway’s Sky Bus Technology, costing one-fourth the elevated Metro Rail, is dumped on safety considerations while safety concerns are causing delays in commissioning of Mumbai Monorail. The imported monorail technology, which costs 70% more than the Sky Bus, has been given preference (over Skybus) despite its capacity being barely one seventh of the indigenous Sky Bus capacity. Why are we so defeatists towards not adopting Indian innovations?
 
Newspapers reports on 6 September 2013...
 
“Monorail likely to be delayed further, contractors pulled up” … Hindustan Times
 
“Chembur Wadala Monorail Unsafe: MMRDA Officials” … DNA
 
“MMRDA raises doubts over monorail safety” … Times of India
 
“Madan (Metropolitan Commissioner, MMRDA) spoke about the lack of safety on the monorail while referring to last month’s incident of a panel door falling. Additional commissioner Bhide said that since the monorail was in its first phase (from Chembur to Wadala), there was ample space below, luckily, no one was hurt. The case would have been different if it was in phase 2 – from Wadala to Saata Rasta – where the stretch below is narrow and crowded.”  … Mumbai Mirror
 
Scene: end September 2004, location Madgao, Goa.
 
Venue: Test track of Sky Bus Metro, the innovative mode of transport of Konkan Railway.
 
“Onboard staff has accidental fall from 6m height from the Sky Bus on a test run, meets fatal end.”
 
This was the news headline at that time. Further testing was totally halted by the investigating agency. The innovator and team leader is not given extension to bring the Sky Bus Technology to logical conclusion. Ministry of Urban Development appoint an expert’s committee comprising of engineers, some from the Railways, including commissioner of Railway Safety and some from Delhi Metro Rail Corporation, competitors to Sky Bus technology, to see the viability of Sky Bus Metro. The expert’s committee was chaired by Prof Indiresan, former director of IIT Madras. It recommended to the Ministry to invest Rs50 crore  to improve certain aspects of design over a period of two years. About Rs50 crore were already spent by industry partners with Konkan Railway for the test track and an additional Rs50 crore would have been very useful in terms of getting the Sky Bus Technology off the ground had Prof Indiresan recommended that the full amount be made available for spending immediately, with outer limit of two years. This kind of recommendation would have helped in giving Indian innovators the signal that government of India is serious in research and development (R&D) that would benefit our nation through indigenous innovations. 
 
The author even spent some time with Dr Mashelkar, the then director general of Council of Scientific and Industrial Research (CSIR) discussing the Sky Bus innovation of B Rajaram, the then managing director of Konkan Railway. CSIR was sitting with funds as much as Rs5,000 crore for R&D then. Perhaps Dr Mashelkar, the advocate of “Gandhian Engineering—Maximum benefit to Maximum number of people with minimum expenditure” failed to recognize such an innovation could compete with the monorail and Metro Rails, with some additional benefits thrown in. Perhaps CSIR did not cover “technological innovations”.
 
There have been fatal accidents in the construction phase of Mumbai Metro as well as Mumbai monorail. Falling of the door of a monorail could have happened in habited areas of the route and would have had, on its record, some deaths too. It was just a coincidence that it fell on an empty road.
 
Having stopped further testing for three months in the case of Sky Bus, should not the government have stopped construction or testing of monorail or Metro Rail? Delhi Metro too has had its share of accidents, and not to speak of 3,600 people losing their lives every year on the suburban railway in Mumbai.
 
Are we not self-defeatists that we allowed the Konkan Railways team of enthusiastic and energised engineers disperse to their respective parent railways, and that we allowed the test track and the rail coach lie idle in Goa to get rusted?
 
While about 3,600 people get killed every year on the Mumbai suburban railway system, mainly due to heavy overload, the government does not seem to care to work on something like Bus Rapid Transit System (BRTS), which will cost less than one twentieth of Metro Rail and allow Indian geniuses to develop to serve.
 
With current prices and sliding rupee-US dollar parity, comparative statements for various modes of mass transits are presented. It is obvious that BRTS should be priority one followed by the Sky Bus. Construction time is also indicated, considering that a highly stressed Mumbai transport infrastructure will not be significantly further stretched during construction phase. Mumbai has to be functional even as infrastructure projects are taken up for implementation.
 

The figures shown above may appear to be exaggerated. If there are enough challenging queries on this article, the Author is willing to put the computations in the public domain. Let us be practical, pragmatic in developing our technologies and use them to make “Gandhian Engineering” a reality. Let us not be defeatists.
 
(Sudhir Badami is a civil engineer and transportation analyst. He is on Government of Maharashtra’s Steering Committee on BRTS for Mumbai and Mumbai Metropolitan Region Development Authority’s Technical Advisory Committee on BRTS for Mumbai. He is also member of Research & MIS Committee of Unified Mumbai Metropolitan Transport Authority. He was member of Bombay High Court appointed erstwhile Road Monitoring Committee (2006-07).  He is member of the committee constituted by the Bombay High Court for making the Railways, especially the suburban railways system friendly towards Persons with Disability (2011- ). While he has been an active campaigner against Noise for more than a decade, he is a strong believer in functioning democracy. He can be contacted at [email protected])

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COMMENTS

SS

3 years ago

On one hand, we are plan to spend 12-18 billion dollars on just 126 rafale planes, while on the other hand we ignore such a state of the art technology skybus which would have helped lacs & lacs of Indians to travel safely in metro cities. Difficult to believe that our government can take such stupid & short sighted decisions. It did not allocate 50 crs...just 50 crs for such beautiful technology. what a sad story. When will our politicians start thinking about our nation & stop thinking about corruption??? Let the God save our country.

Java

3 years ago

Indigenous technologies developed by government institutions are NOT acceptable because they do not have the potential to provide any incentives to the ministers , bureaucrats and purchasing authorities. Even private institutions do not have a chance if they are upright and fail to pass money under the table. That is why imported technology is always preferred by the government, even if it is outdated and prohibitively expensive: because it means more kickbacks all around and overflowing bank accounts in tax havens abroad.

Lessons from UK about mis-selling of insurance
British banks and financial institutions were asked to shell out £1.3 billion in compensation for mis-selling insurance from Card Protection Plan. What lessons can we learn from this episode?
 
In a first of its kind, the UK regulator had, in November 2012, imposed the largest fine of 10.5 million British pounds (equivalent of over Rs100 crore) on an insurance company called Card Protection Plan Ltd (CPP) of UK for mis-selling insurance products to consumers through banks and other financial institutions since January 2005. 
 
As per the press release dated 22 August 2013, the Financial Conduct Authority (FCA), the UK regulator, it is reported that two insurance products, called ‘Card Protection’, which cost around £30 per year and ‘Identity Protection’, which cost about £80 per year were widely mis-sold by CPP. Customers were given misleading and unclear information about the policies so that they bought the cover. The cover was neither needed nor did it cover risks that had been greatly exaggerated. In addition to selling directly to customers, high street banks and credit card issuers introduced millions of customers to CPP, the insurer; thereby 13 more institutions became parties to this misadventure.
 
The key failings on the part of the insurance company identified were:
 
CPP sold its Card Protection product by emphasising that customers would benefit from up to £100,000 worth of insurance cover. This was not needed because customers were already covered by their banks;
 
CPP overstated the risks and consequences of identity theft during sales of its Identity Protection product.
 
Protection of consumer is paramount in Great Britain:
 
Not satisfied with imposing the aforesaid fine on the insurance company the FCA, in pursuance of its objective to secure an appropriate degree of protection for consumers and to enhance the integrity of the UK financial system, compelled the insurer and all those banks and institutions who had sold the policy to refund the premium charged along with interest at 8% to all the policy holders, who were mis-sold these policies since 14 January, 2005.
 
This agreement arrived last week between the FCA and the following institutions would result in providing redress to seven million customers, who between them bought and renewed about 23 million policies during the last about seven years. The redress bill could be up to £1.3 billion (about Rs13,000 crore) and redress per customer will depend on the type of policy (or policies) owned and the length of time it was held. 
 
Here are the institutions involved in mis-selling insurance:
 
Bank of Scotland Plc (part of Lloyds Banking Group)
Barclays Bank Plc
Canada Square Operations Limited (formerly Egg Banking Plc)
Capital One (Europe) Plc
Clydesdale Bank Plc (part of National Australia Group Europe)
Home Retail Group Insurance Services Limited
HSBC Bank Plc
MBNA Limited
Morgan Stanley Bank International Limited
Nationwide Building Society
Santander UK Plc
The Royal Bank of Scotland Plc
Tesco Personal Finance Plc
The Card Protection Plan Ltd. the insurance company primarily responsible.
 
Source: www.fca.org.uk
 
This is a great victory for the consumer movement in Britain. It is also a great achievement for the regulator, who brought all those banks and institutions to their knees. The FCA forced them to refund entire premium collected for more than seven years, along with interest at 8%, when the prevailing deposit rates are less then 2% presently in UK.
  
What is the role of FCA of UK?
 
The action initiated by the UK regulator is a suo motu step based on their own observations of what was happening in the markets. This is a classic example of how they protect the consumers. In fact, the FCA is established under the UK Financial Services Act, 2012 for not only regulating all the players in the financial services industry but also with the objective of protecting consumers and to champion their cause to ensure that they get a fair deal.
 
The Financial Services Act came into force on 1 April 2013. The Act makes fundamental changes to the way that financial services providers, like banks, are regulated. The Act will protect consumers and supervise all firms to ensure that business across financial services and markets is conducted in a way that advances the interests of all users and participants.
 
What lessons can we learn from this episode?
 
Unfortunately, In India, we do not have a common regulator for all the financial services as it is in the case in UK. None of our regulators have been able to take stern action for mis-selling of insurance products by banks so far, leaving the consumers to their fate. With the Insurance Regulatory and Development Authority (IRDA) recently giving its nod for banks to become insurance brokers, the whole picture of marketing of insurance will change (it also depends if the Reserve Bank of India (RBI) permits banks to go along with this proposal). But what is important is that before permitting banks to become insurance brokers, RBI should come out with stringent norms for all players in the market and enforce them with an iron hand, with a view to safeguard the interest of all the consumers. It should also protect them not only against mis-selling but also against conning with all types of guarantees and promises, with no intention to honour them.  
 
Mis-selling of insurance is so much imbedded in the industry that even Rajiv Takru, secretary, financial services at the ministry of finance, was himself a victim of this scourge many years back. Here is what he narrated at an event in Mumbai, reproduced from Moneylife, dated 14 August, 2013… 
 
“Mr Takru gave his own example where he was mis-sold by a smooth talking Life Insurance Corporate of India (LIC) agent in 1992. He was told that the premium of Rs3,000 has to be paid for 15 years. In case of unfortunate death, his family will get Rs1 lakh. If not, then he can claim the maturity benefit of Rs1 lakh at the end of 15 years. After diligently paying premium for 15 years, to his shock he found that the maturity benefit will be paid when he turns 80 years. So, he has to wait for another 34 years after premium payment term of 15 years to get his Rs1 lakh. He says that if it can happen to a literate person, then it is surely an issue for illiterate persons.”
 
Today, in India, we do not have a single unified statutory authority that can protect and champion the cause of the consumers on the lines of the FCA in UK. This has resulted in making the consumer a pauper (not a proverbial King) and silently suffering like an orphan left to fend for him or herself. Mis-selling of insurance or for that matter any financial service is not only unethical but cruel in a country where a substantial part of the population is not enough literate in financial matters. The inability for the financially illiterate to understand the implication of insurance and banking terms written in small print makes a mockery of the entire financial system.
 
Role of Moneylife in protecting victims of mis-selling financial products
 
Against this state of affairs in our country, the movement initiated by Moneylife Foundation to guide, educate and protect the victims of mis-selling without any expectation of reward or return, is a laudable effort. They deserve the support of every citizen of this country. Only by spreading financial literacy and empowering people will there be hope to minimise mis-selling, which has considerable implications on the life of an ordinary person. 
 
The success stories of Moneylife Foundation published in the recent past in securing justice to several victims of mis-selling is a testimony of how a non-governmental organization (NGO) and not-for-profit institution could achieve success without any support from the government.
 
Let us, therefore, put our shoulders to the wheel of Moneylife Foundation by contributing our mite through our ‘tan, man and dhan’ to support a movement that can provide succour and relief to a large number of our people, but can survive only with your support and patronage. 
 
 
 
(The author is a banking analyst and is a regular contributor on banking and finance. He writes for Moneylife under the pen-name ‘Gurpur’.)
 

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COMMENTS

Harish

3 years ago

Crows are black everywhere

REPLY

nagesh kini

In Reply to Harish 3 years ago

But in India they are a shade worse.
All because the penalties are low and offenses are compounded.

Harish

In Reply to nagesh kini 3 years ago

But in India there is a jail sentences in so called free world, the penalties depends on your status. If you are an Individual(specially Origin matters) you get prison & penalty, If you are a corporate you only get penalty, If you are employee of a corporate you are free. You can have a look at history(LIBOR, Money Laundering,Insider Trading, etc. )
Sir, do you know Mr. Rajasundaram(may be) is getting executive treatment in Murican prison. He is sentenced for insider trading with poor IITian Mr. Gupta.

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