The Hindu Business Line : Pepper traders go bankrupt as prices crash

The crash of pepper prices in recent weeks has driven some of the major pepper traders in Delhi to bankruptcy forcing them to withdraw from the market. Those who have burnt their fingers have also become inactive, and prices of the commodity continue to fall as a result.

Anticipating better prices following reports of a tangible fall in the Indonesian production this year, the traders had bought pepper at higher prices to beef up their inventories. But contrary to their expectations, prices started declining in the last few weeks and the trend still continues.

Besides, the domestic traders had expected the Union Government to put a cap on imports from Sri Lanka, and thus, fuelling the prices further. But, that too has failed to happen.

On Saturday, prices dropped by Rs 200 a quintal from that of September 1. MG 1 and ungarbled were sold at Rs 6,500 and Rs 6,200 a quintal respectively as against Rs 6,700 and Rs 6,400 on September 1.

While futures, which were down on September 2 by Rs 86-284 a quintal, recovered marginally on Saturday. September delivery was quoted at Rs 6,529, October at Rs 6,599, November at Rs 6,891, December at Rs 6,865, January Rs 7,115 and February at Rs 6,980 a quintal.

The price of MG 1, which was ruling at Rs 7,500 a quintal on July 3 slid to Rs 7,000 on August 14 and to Rs 6,700 a quintal on September 1 and Rs 6,600 the next day. Thus, in two months, the prices have dropped by Rs 900 a quintal.

The combined losses of the traders in Delhi is estimated at Rs 25 crore, market sources in Delhi told Business Line.

Decline in prices of other spices such as chilli, cumin etc, had also aggravated their financial crisis, they said. Given the situation, they are not able to sell the commodity at the prevailing prices and the resultant cash crunch had made them default on payment to the suppliers, the sources said.

The availability of pepper at low prices in the upcountry market — where the commodity comes through the primary markets in Karnataka and some parts of Kerala through illegal routes, dodging purchase and sales taxes — has negatively affected the trade, they alleged. Added to this, imported pepper is also being sold at low prices.

For a trader who buys pepper from Kochi, the transportation cost alone would come to around Rs 5 per kg apart from taxes. Thus, the landed cost of pepper in Delhi bought from Kochi at Rs 68 a kg would finally figure around Rs 74 - Rs 75. As against this, some Karnataka based traders are selling at Rs 68 - Rs 70 a kg in the Delhi market.

This apart, the inflow of Sri Lankan pepper has also started. The landed cost of Sri Lankan pepper at the current offered price is Rs 67 a kg c.i.f at any Indian port and the internal container depots (ICD).

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