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.