• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest
• The New Manager

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Suresh P. Iyengar

Product panel members `resign'; issue over delivery

Mumbai May 27 Jeera (cumin seed) futures trading on NCDEX is facing trouble. Members of the Jeera Product Committee on NCDEX say they have quit (a copy of the letter sent by them to NCDEX is with Business Line), but NCDEX officials have denied any such event.

In their letter announcing their intention to resign from the committee, the members have charged NCDEX with not setting up necessary infrastructure for jeera and wanting to operate purely on speculative basis.

Goods rejected

"Delivery of goods is not accepted by agencies appointed by the exchange when the prices peaked and goods are rejected without any proper reason.

"At least 80 per cent of the goods were rejected by clients who were to take delivery," they alleged in their letter.

They said samples of produce to be delivered were given in the presence of the Forward Markets Commission (FMC) members and the quality was found to be "excellent" but the exchange still rejected it.

Quality problem

Quality problem is stated to be the main reason for the members resorting to such a step.

The 12-member committee fixes quality specifications for the exchange in consultation with farmers, millers, traders, corporate houses and warehouses.

The quality specifications were changed in November on the committee's request, says an NCDEX official. Jeera is among the commodities most delivered on NCDEX. "The quality specifications are set in such a way to facilitate maximum delivery on expiry of the contract. "While encouraging deliveries, we also keep an eye on the quality so that buyers are not taken for a ride," says the official. But traders in Unjha, Gujarat, have a different story to say. "The exchange-appointed agencies check the quality randomly and reject the entire stock. It is done mainly at a time when prices rule high," a trader said.

The members of the committee, in their letter, alleged: "There seems to be no proper standards for quality and parameters are handled differently when the exchange has to receive and deliver goods."

Old stocks

Buyers, on the other hand, say traders are holding back new stocks and are offloading the old stocks.

"Many traders have hoarded stocks in anticipation of better prices. The quality of the goods is not up to mark as it has a shelf life of six months only for sale on futures exchange. Since the prices have peaked, traders are trying to sell old produce on the stock exchanges," said Mr Lalit Suri, a Mumbai-based exporter. Spot prices of jeera have increased by Rs 4,200 a quintal since January to Rs 13,300 in May.

`Price rigging'

The committee members point to trade on April 16, 20 and May 23. On April 16, June contract for the commodity ruled between a high of Rs 14,750 a quintal and Rs 14,200, while spot ruled at Rs 13,140.

Subsequently on April 20, June contracts slid to between Rs 14,435 and Rs 14,386 while spot to Rs 13,000. On May 23, the contract ruled between Rs 11,790 and Rs 11,750, while spot slipped to Rs 12,760.

During the above period, futures price declined by Rs 3,000, while spot by Rs 240 only. "This clearly indicates that the exchange is functioning on price rigging," said the members in their letter. But analysts say the decline in prices is due to the controversy over quality.

"Futures price are lower than spot as speculators sensed an opportunity in NCDEX rejecting jeera. They sold heavily pulling down June contracts," an analyst said.

Questioning NCDEX's calculation on spot prices, the members said reduction in the exposure that a member can take in jeera futures from 600 tonnes to 120 tonnes was done without consulting anyone. "The circular on this reduction was done when July contract had commenced," one of the members said. Mr P.H. Ravikumar, NCDEX Managing Director, told Business Line: "The jeera Product Committee has not resigned. We are aware of the issues on quality of jeera delivered on NCDEX warehouses and will sort out if there are any genuine grievances."

"The committee members are not appointed by us; they are doing the job for the exchange voluntarily. So, there is no question of them resigning," said an NCDEX official.

(With additional inputs from M.R. Subramani)

More Stories on : Spices & Condiments | Commodity Exchanges

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
AP plans low interest loans for farmers

Copyright © 2007, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line